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Fund Profile

CC Japan Income & Growth 15 February 2023

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by CC Japan Income & Growth. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
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Overview

CC Japan Income & Growth Trust (LON:CCJI) is designed to offer long-term exposure to the growth and income potential in Japan. Japan has been undergoing a renaissance in recent years, with radical reform programmes aimed at generating higher returns on the capital invested by companies, which are benefitting investors in numerous ways. Japanese companies are cash-rich, and increasingly this cash is being returned to shareholders via dividends or buybacks. Manager Richard Aston’s dividend growth strategy looks for companies which are demonstrating strong cashflow generation and have the ability and willingness to increase distributions to shareholders. This approach is designed to appeal to both income-seekers and long-term growth investors who want to benefit from the steady compounding of cashflows.

As we discuss in the Performance section, CCJI has performed well over the past year, particularly against its peers, which tend to have a strong bias to high-growth companies that has hindered returns in a higher-interest-rate environment. CCJI’s quality and dividend disciplines give it a more balanced stylistic exposure which has helped as the growth style has fallen out of favour.

Richard is optimistic about the short-term future for Japan, with relatively modest levels of inflation expected and a surge in economic activity likely after its belated reopening from the pandemic in the autumn. As a result, he has tilted the Portfolio more towards domestically focussed small and mid caps.

CCJI yields 3.1% on a historical basis, with robust cover thanks to a special distributable reserve. Even during the pandemic, cover by current-year earnings never fell below one.

Analyst's View

We think CCJI is an attractive ‘buy and hold’ strategy to use to invest in Japan. The trust’s total return approach to investment, with a dual focus on the growth potential in the shares of a company and its dividends, should provide relatively stable returns. This is thanks to the compounding of dividends, particularly as Japanese companies become more focussed on maintaining or growing dividends rather than keeping a fixed payout ratio of earnings. Meanwhile the lack of extreme style biases is also likely to appeal to long-term investors. Recent events have reminded us that pronounced style biases can be both very beneficial and very painful for investors when the macro becomes volatile.

Some investors are cynical about Japan, which suffered two and a half decades of poor returns following the bursting of a bubble in the 1980s. But that was over 30 years ago now. In the past decade a sea change in Japanese business culture has helped the Topix outperform the FTSE considerably in GBP terms and generated numerous opportunities for active managers to add alpha by spotting companies which are unlocking value in various ways for shareholders. In our view these attractions are compounded by the near-term outlook for Japan. A late pandemic reopening trade, a weak yen and major trading partner China’s reopening are all reasons we think the country could perform well versus its developed market peers in 2023.

Bull

  • Strong long-term track record based on quality growth stock-picking
  • Strong dividend growth potential in portfolio and market
  • Discount offers an attractive entry point, with optimism growing around Japan for 2023

Bear

  • Yield is not high compared to that of peers in other developed markets
  • May underperform peers in heavily style-driven markets
  • Gearing can enhance losses on the downside
Continue to Portfolio
2024 Kepler Income & Growth Rated Fund

This trust has been awarded a rating by Kepler Trust Intelligence for income & growth... Find out more

Fund History

17 Apr 2024 Fund Analysis
CCJI’s differentiated investment approach has led to sector-leading performance…
09 Apr 2024 The opportunity in Japan, with CCJI's Richard Aston - Podcast: Trust Issues #28
We discuss policy changes, small and mid-caps, and Richard's approach to valuations...
08 Mar 2024 Investing in Japan with investment trusts
Closed-ended funds offer an attractive way to access the Japanese stock market…
17 Jan 2024 Top of the Pops
We reveal the winners of our investment trust ratings for 2024…
03 Jan 2024 Probably better asking an octopus
Our investment trust experts uncurl a tentacle each and choose their ‘top picks’ for 2024…
05 Oct 2023 Fund Analysis
CCJI leads the performance tables in Japan over one, three and five years…
27 Sep 2023 Ohayō Japan!
Our analysts discuss what they think may be a new dawn for the Land of the Rising Sun...
14 Jul 2023 Japan’s value shift
Global equity funds are upping exposure to Japan…
06 Apr 2023 Interview with CC Japan Income & Growth's manager Richard Aston
We discuss why Japan has so many opportunities for income investors...
15 Feb 2023 Lost in translation
We argue Japanese equities look attractive on both a short and long-term view…
15 Feb 2023 Fund Analysis
CCJI is an attractive ‘buy and hold’ strategy…
11 Jan 2023 Solving the Rubik’s Cube
We reveal the winners of our investment trust ratings for 2023…
12 Oct 2022 The Buck stops where?
The US dollar has surged in 2022, but many are questioning whether this can be sustained...
07 Sep 2022 Fund Analysis
By focussing on Japan’s corporate leaders, CCJI’s performance has led the AIC Japan sector over both one and five years…
19 Aug 2022 Every silver lining has a cloud
A recent bounce back in equities may be hiding wider problems for investors…
06 May 2022 The Land of the Falling Yen
A cheaper currency is unlikely to change long-term trends in Japan…
20 Apr 2022 On the hunt
We review discounts in the investment trust space against a backdrop of harsh conditions...
02 Mar 2022 Fund Analysis
CCJI has outperformed its peers and the TOPIX index over the last 12 months, while offering a consistent source of income…
03 Nov 2021 Don't fear the reaper
With market direction hard to call, we consider the case for taking a long-term view in the investment trust sector…
15 Sep 2021 Bargains galore
We review our discounted opportunities portfolio, with one constituent rallying more than 30% in just two months…
18 Aug 2021 Fund Analysis
CCJI has recently outperformed its peers and benchmark, while still being the highest-yielding trust in its sector…
14 Jul 2021 Grade inflation
We look at how our discounted opportunities portfolio has done in the first half of the year and update on the performance of our long-term rated funds…
02 Jun 2021 Fortune favours the brave (sometimes)
Our research suggests wide discounts often herald high NAV returns too…
05 May 2021 Vive la revolution
For thirty years quality has had a structural tailwind; but revolt is in the air and value is on the barricades…
14 Apr 2021 Wide Boys
We review our portfolio of chonky discounts as one star performer hits its target…
24 Mar 2021 Shoot to Thrill: ISA targets for long term growth
We all intend to invest for the long-term but can often be distracted by the news...
16 Mar 2021 Fund Analysis
Offering the highest yield in the sector, CCJI focusses on quality Japanese companies capitalising on corporate reforms...
02 Dec 2020 Can you teach an old dog new tricks?
Cheap companies in Japan are drowning in what cheap companies elsewhere would kill for: buckets of cash…
01 Oct 2020 Alternatives for Income Investors
Slides and audio from our event focused on alternative routes to a reliable income…
30 Sep 2020 Slides and Audio: CC Japan Income & Growth
View the presentation and listen to the audio from our 'Alternatives for Income Investors' event on 29 September...
20 Aug 2020 Alternatives for income investors
In a world where dividend are under unprecedented pressure, our income focused online event in September should provide serious food for thought…
13 Aug 2020 Underground bangers
We look for hidden gems in the smaller end of the investment trust universe...
29 Jul 2020 To be, or not to be (geared), that is the question
Gearing is part of the toolkit that trusts use to outperform OEICs. But how is it best implemented?...
30 Jun 2020 Fund Analysis
With the highest yield in its sector, CCJI aims to take advantage of long-term shifts in the way Japanese companies are managed...
05 Sep 2018 Fund Analysis
The strategy aims to take advantage of a secular shift towards shareholder-friendly policies, including dividends and buybacks, in corporate Japan...
05 Sep 2018 Bullseye
The third arrow of Shinzo Abe's grand plan, corporate reform, could have significant implications for undervalued Japanese equities...
View all

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