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Stock of the week: Mitsubishi UFJ Financial Group

We decided to have a more interesting pick this week and go for geographic diversification suitable for risk-reducing in any dividend portfolio. This week also an analyst from JPMorgan published investing recommendations for the year 2020 and their focus is on Japanese Banks.

We decided to follow their path and choose good dividend payers in the Japanese bank industry. We picked Mitsubishi UFJ Financial Group as it is one of the leaders in the industry... But not only inside Japan borders but globally. This holding is currently 5th largest bank in the world by assets. 

Currently, this holding holds big stakes in several big Japanese banks but also owns 22% of Morgan Stanley (USA) investment bank and 20% of Vietinbank (Vietnam).

Mitsubishi UFJ Financial Group dividend yield is very nice 3,7 % (or 4.23 % forward yield) and a healthy payout ratio of around 55% is a good indicator of the sustainability of those dividends.

Why buy MUFG:

  • Global ambitions and solid growth for a company of its size
  • Great diversification for portfolio (Asian banking industry)
  • Currently undervalued (price-to-book and price-to-earnings are lower than industry averages)

Why not buy MUFG:

  • Bank of Japan's negative interest rate policy puts pressure on the Japanese banking sector
  • Escalating expenses is the biggest current problem. Investors have to believe that the company will handle rising costs in a good way soon

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