Raising the dividend payout target from 30% to 40% (2006)

A company that framed its promise as a ratio

What is striking here is less the size of the increase than the form of the promise. Define the distribution to shareholders as a proportion of profit rather than as so many yen per share, and the dividend falls in weak years but rises automatically in strong ones. That a company whose business scale moved more than tenfold in twenty years could keep printing the same sentence in every annual securities report owes much to the promise being a ratio. There is something consistent, too, in a founder who declined 70% of his orders to keep the company at its own scale also choosing a ratio rather than an absolute sum in his relationship with shareholders.

That said, promising to send four-tenths of profit outside first is also to set your own ceiling on the cash you may keep. Fund a large acquisition or a long in-house product programme, and the promise begins to bind. Recent periods with payout ratios above 50% show distribution running ahead of profit growth. How far investment in growth fields and a 40%-plus return to shareholders can be reconciled is a question this company has carried since the moment it put its promise in the form of a ratio.