Asian Dividend Gems: Takasago International Corporation

• Takasago International (4914 JP) is the number one player in Japan/Asia in the Flavor and Fragrance business.

• The company's dividend yield also increased sharply from 2.2% in FY24 to 3.8% in FY25, on the back of strong growth in earnings and solid dividend payout (35% in FY25).

• Core customers of the company (Nestlé, Procter & Gamble, Coca-Cola, L’Oréal, Unilever, Kao, and Suntory) are very careful and cautious in terms of what companies they buy these products from.

Key Investment Highlights

Takasago International (4914 JP) has an excellent combination of solid growth in sales and profits along with attractive valuation multiples. Its sales increased at CAGR of 12.2% in the past three years and 8.5% in the past five years. Its net income increased at CAGR of 14.4% and 31.3% in the past three and five years, respectively. The company achieved operating margin of 6.5% in FY25, up sharply from 1.2% in FY24. Its operating margin averaged 4.1% from FY21 to FY23.

The company's dividend yield also increased sharply from 2.2% in FY24 to 3.8% in FY25, on the back of strong growth in earnings and solid dividend payout (35% in FY25). Takasago ranks 5 out of 5 in the Smartkarma Smartscore Dividend category.

Most importantly, the company is the number one player in Japan/Asia in the Flavor and Fragrance business. Both of these areas involve either eating or bodily scent/smell. People in general are sensitive and cautious about what they eat and fragrances they use. Therefore, the core customers of the company (Nestlé, Procter & Gamble, Coca-Cola, L’Oréal, Unilever, Kao, and Suntory) are very careful and cautious in terms of what companies they buy these products from.

We would argue that the barriers to entry (especially getting sizeable orders from these major customers) are relatively high. Takasago has built up its customer loyalty after being in business for more than a century. In other words, it is likely to become difficult to break into this business and take away market share from leading players in Japan/Asia such as Takasago.

Over the next 2-3 years, an annual sales growth rate of 5-10%+ and operating profit growth of 15-20%+ reasonable for the company.

Takasago International (4914 JP) Earnings and Dividends (Source: Smartkarma)