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Fund Profile

CC Japan Income & Growth 05 October 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
CCJI leads the performance tables in Japan over one, three and five years…
Overview

CC Japan Income & Growth (CCJI) is intended to be a long-term investment in Japanese equities, generating a total return comprising a steadily rising dividend and capital appreciation. The strategy aims to harness the compounding of cash flows within high-quality businesses, both in terms of their ability to deliver consistent earnings growth and in terms of their ability to deliver stable and growing dividends.

CCJI delivers the highest yield in the AIC Japan sector and has grown its dividend by 8.5% on an annual compound basis since launch (see Dividend). It has also done extremely well in terms of total return, delivering the highest NAV total returns in the AIC Japan sector since then – and higher returns than the AIC Japanese Smaller Companies’ sector funds have too.

In both cases, success has been built on a strategy of selecting high quality companies and paying attention to valuation. This is differentiated from the high growth strategies that predominate in Japanese equity trusts. Manager Richard Aston argues that the market is increasingly rewarding companies that have quality characteristics and strong corporate governance, thanks to ongoing corporate governance reforms which have created a different environment for investing in Japan. There is a growing awareness of the need for stability in shareholder return policies and this has resulted in record buybacks year on year and a growing dividend culture (see Portfolio).

CCJI runs with a consistent level of net gearing around the 20% of NAV mark, in order to benefit from the long-term growth potential in Japan without having to time the market, and in order to boost the yield distributable to shareholders. This increases growth potential in rising markets and susceptibility to falling markets, although this is offset by the high quality and relatively defensive characteristics Richard looks for.

CCJI’s success is reflected in a narrow discount versus the peer group average, which is 3.8% at the time of writing. The trust has been awarded a Kepler Income & Growth rating for 2023.

Analyst's View

We think CCJI is an attractive option for core exposure to Japan for both growth and income investors. The focus on quality companies which can compound their cashflows at attractive rates should lead to steady long-term growth. Meanwhile the dividend growth prospects appear excellent given the ongoing corporate governance reforms which have seen the dividend culture transformed. Richard has a very clear strategy when it comes to stock selection, and has been consistent in implementing it. We think this contributes to it being an attractive buy-and-hold investment, and investors can be confident the trust will continue to behave as expected. It is worth bearing in mind that style won’t always work in its favour, as markets can go through periods of rewarding extreme growth or value. However, in our view, the focus on quality, attention to valuation and centrality of dividends will likely appeal to many investors looking for a long-term investment.

Some investors will have no or little exposure to Japan. We would argue that the outlook is as bright as it has been for many years, with the corporate governance reforms seemingly bearing real fruit in terms of buybacks and dividends as well as companies focussing more on earnings growth-accretive activity. The economic picture is also interesting. Japan looks likely to finally escape the zero-interest rate trap, with modest inflation being welcome. Of course, it cannot escape any global downturn if one emerges, but given the endogenous drivers, we think Japan is a relatively attractive place to invest at this juncture.

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 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

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 Fund Analysis
CCJI is an attractive ‘buy and hold’ strategy…
15 Feb 2023 Lost in translation
We argue Japanese equities look attractive on both a short and long-term view…
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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