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Japanese Dividends May Rise 30% as Cash Flow Swells, UBS Says

June 14 (Bloomberg) -- Japanese companies will likely boost dividends as earnings increase free cash flow and liquid assets, according to UBS AG.

“Companies have unprecedented amounts of cash, and are likely to increase shareholder returns beyond market forecasts,” Shoji Hirakawa, chief equity strategist at UBS in Tokyo, wrote in a report dated June 11.

Hirakawa, who estimates gains of 50 percent in pre-tax profit and 10 percent in capital spending in fiscal 2010, said dividends will jump as much as 30 percent to an aggregate 4.5 trillion yen ($49 billion) this year. The projection, based on data from 952 non-financial companies listed on the Tokyo Stock Exchange’s first section, exceeds corporate forecasts for an average 14 percent increase, according to the report.

UBS is focusing on Takeda Pharmaceutical Co., NTT DoCoMo Inc., Mitsui & Co., Kansai Electric Power Co., Osaka Gas Co., Alps Electric Co. and Sumitomo Trust & Banking Co. among the shares it rates as “buy,” the report said.

To contact the reporter on the story: Akiko Ikeda in Tokyo at iakiko@bloomberg.net.

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net.

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