CC JAPAN INCOME & GROWTH TRUST is a hit story within the Land of the Rising Sun

Members of the board and management team of investment trust CC Japan Income & Growth were out in force at the London Stock Exchange (LSE) last week to celebrate the fund’s tenth birthday.

It was a joyous occasion as they pressed the button signalling the end of the day’s trading – and rightly so.

The trust, managed by boutique investment house Chikara, has been a success story, with launch shareholders so far enjoying total returns of close to 190 per cent. These compare against a return from the Tokyo Stock Price Index (commonly known as TOPIX) of just under 150 per cent.

Richard Aston, who had his finger on the button at the LSE, has run the trust since its launch in 2015, after having spent eight years in Tokyo as part of the Japanese equities team at JPMorgan Asset Management.

‘When I rocked up in Tokyo in 2003, Japan was very much a travel destination,’ he says.

‘But today, while still a fantastic place to visit, it has become an investment destination for many international investors. The argument for investing in Japan is stronger than ever.’

He says the sweeping corporate governance reforms in Japan in recent years have made the companies there more shareholder friendly, resulting in most paying regular (and growing) dividends.

The trust has taken advantage of this with a portfolio skewed towards companies now paying dividends as a matter of course.

The result is that the £298 million fund will notch up its ninth year of annual dividend growth early next year, when the final six-monthly dividend is announced for the financial year ending March 31.

Last year’s annual income payment to shareholders was 5.45p, with the shares currently trading around £2.22.

‘It’s a simple investment proposition,’ says Aston. ‘We look for companies that will deliver us an attractive total return, comprising a mix of capital appreciation and dividend growth.’

Some 400 companies are on its radar, although only a quarter get closely monitored with just 38 ending up in the portfolio.

The vast majority are dividend growers: companies such as Mitsubishi Corporation and Sumitomo Mitsui Financial Group, which the trust has held since launch and 2016 respectively, albeit taking occasional profits.

Yet Aston is also happy to hold a small number of stocks where maybe the outlook for long-term dividend growth is good, but the near term is less certain.

Nissan Chemical is a case in point. He says: ‘This is a company that has many arms and legs, be it the production of chemicals, animal health products, or coating materials for LCD units. These businesses have required substantial investment, reducing the cash available to pay shareholder dividends.

‘But, at some stage, the high margins that Nissan earns from these products will help put it back on a better dividend footing. We’re happy to wait for that to happen.’

While a more shareholder-focused business community has been great news for investors, Aston says there are other positives which point to an exciting future for Japanese equities.

The return of inflation after years of deflation has allowed many companies to push up prices, boosting cash flow and profit

margins. He also believes that Japan is in something of a geopolitical sweet spot, benefiting from strong ties with China, India and the United States.

The trust’s stock market ticker is CCJI and identification code BYSRMH1. Annual charges total 1.03 per cent.