Strong earnings and a growing interest in shareholder satisfaction are urging some Japanese companies to increase their dividend payouts.

The hunt for these high-yielding stocks is boosting market sentiment, supporting Japanese share prices at the end of the fiscal year when, traditionally heavy corporate selling weighs on the market, says Kazuhiro Shimamura.

Furthermore, many of these companies may turn to share buybacks once the next fiscal year is under way, further strengthening stock prices, some analysts say.

"Bargain-hunting money is flowing into stocks with a good dividend yield," said Masatsugu Okeya, chief of stock trading at Chuo Securities, noting that such buying is offsetting traditional end-of-year selling by corporations. Japanese companies often unwind cross-shareholdings and sell stocks to shore up their balance sheets at the end of the fiscal year, which runs from April 1 to March 31.

According to a survey conducted by Shinko Research Institute, a research arm of Shinko Securities Co.,companies which offer high dividend yields have surpassed those providing low returns to shareholders since January. The 60 leading companies listed on the Tokyo Stock Exchange’s First Section in terms of dividend yield outbalanced the Topix index of all TSE First Section issues by about 13.5% since the beginning of this year through Wednesday, the survey shows.

By comparison, the bottom 60 companies in the dividend-yield rankings outperformed the same index by 7.1%. While investors have long been interested in dividends, the trend has stepped up in recent months because more than the usual number of Japanese companies are raising or resuming dividends, Shinko Research market analyst Takashi Umetsu said.