Yesterday, I promised you an in-depth take on Japan’s economy, as well as a look at my top stock from that country for investors right now.
To that end, I have some bad news, and some good news. The bad news is that Japan is the world’s most heavily indebted country. In fact, it’s actually borrowed so heavily in recent years its debt load is an extraordinary 230% of its Gross Domestic Product. To put this number in perspective, even Greece—with all its economic woes—has a debt-to-GDP ratio of “only” 177%, which is already far higher than anything I would ever want to see in one of my own investments.
Adding insult to injury, just yesterday Japan issued 10-year bonds with negative yields. Now, this is the first time in history Japan has ever taken this specific action, but when you add it all up, over two-thirds of Japan’s government debt already has negative yields. Again, this is not the kind of investment I’d want to hold in my portfolio.
Maybe that’s why in their attempt to stimulate the country’s economy, the Bank of Japan (BOJ) has been so aggressive with monetary policy over the past three years. But even though many of these recent policies have been unconventional (to say the least), at last weekend’s G20 meeting, the BOJ wasn’t even reprimanded for its policies, let alone restricted, as many thought it would be. Maybe that’s because in 2016, Japan’s economy is only expected to grow a miniscule 1%. Yet again, not the kind of investment I’d want to hold in my portfolio today.
But even though Japan’s national economy is far from being the potential world leader it looked to become in the mid- to late-1980s, that doesn’t mean there aren’t still some private investments there that aren’t worth a look from us. For those of you who want to invest in Japan, the good news is that I have just the stock recommendation for you.
Top Stock: Nippon Telegraph & Telephone Corp. (NTT)
Nippon Telegraph & Telephone Corp. (NTT) is a Japanese telecommunications company. Like its American counterparts, NTT provides fixed and mobile voice-related services, IP/packet communications services, telecommunications equipment and system integration. In addition, however, this company also provides financial services, systems development services and construction-related services, giving it a wide-portfolio of revenue generating options.
And these options are paying off nicely even amid Japan’s troubled economy.
NTT trades at less than 14 times forward earnings, which is a solid valuation for any company anywhere in the world. Plus, I’d like to highlight NTT’s FY 2016 earnings are expected to climb 34.4% even while sales are expected to decline. Add all that to 3.5% revenue growth last quarter and an incredible 42.1% earnings growth during the same time, and you can start to see why NTT is my favorite investment Japan’s struggling economy has to offer you today.
In fact, it’s got A-ratings in both the fundamental and quantitative categories in my Portfolio Grader tool, giving it an overall A-rating in Portfolio Grader. Plus, with its 1.91% annual dividend yield to boot, it’s holding onto a solid A-rating in my brand new Dividend Grader tool.
All in all, NTT is an impressive company amid a struggling economy. Please tune in tomorrow as I explore Mexico’s economic environment and give you my top pick from that country as well.