[Obayashi] Capital Policy & Shareholder Returns — ROE 10%+, DOE ~5%, ¥100bn Buyback

Note: This article is a factual summary based on Obayashi Corporation’s published IR material (Investors’ Guide, June 2026 edition). It is not a recommendation to buy or sell any security. Figures are as of the publication of the source material. Investment decisions are your own responsibility.

Pages 27 and 28 of the Investors’ Guide set out Obayashi’s capital policy: how it decides how much equity the business needs, what return it expects on that equity, and how it splits cash between reinvestment and shareholders. The starting point is a direct comparison the company draws for itself — its return on equity (ROE) target against what the stock market is estimated to expect it to earn on that equity in the first place.

The target framework: ROE versus the cost of equity

Obayashi states its aim plainly: by controlling equity through profit generation and strategic shareholder returns, the group targets an ROE of 10% or more, exceeding the cost of shareholders’ equity expected by the stock market. The guide frames this as two building blocks combining into one target.

Component	Level
Profit target	¥100.0bn
Necessary equity level	¥1 trillion
ROE target	10% or more
Stock market expectation of cost of shareholders’ equity (Obayashi Group estimate, FY2025; unchanged from FY2023)	8–9%

The ¥100.0bn profit target is delivered through “sustainable profit growth”: continued investment in human resources, digital transformation (DX), technology and productivity, plus proactive and timely growth investment in promising fields and fields where the group can help solve social issues. Actual results are already tracking ahead of this profile — see the year-by-year profit and ROE figures in MTP2022 KPIs.

The comparison between the two target figures is the point of the page: rather than aiming merely to cover its estimated cost of capital, Obayashi has set its ROE target deliberately above the 8–9% range it believes the market expects, treating that range as a floor rather than a destination.

Setting a “necessary” equity level

Framing capital policy this way — a profit target divided by a deliberately chosen equity level — lets Obayashi manage ROE from both directions at once, rather than simply reporting whatever ratio falls out of the balance sheet at year-end. The guide lists the factors the company takes into account when setting that equity level, business by business, through FY2026:

• Changes in business scale
• Execution of investments
• Changes in the asset-liability balance of the construction business
• Revisions to payment terms
• Sales of cross-shareholdings
• Use of leverage in the real estate development business
• Other factors through FY2026

Obayashi also finances part of the business through interest-bearing debt and nonrecourse loans, using leverage deliberately to improve capital efficiency rather than funding everything with equity. The cross-shareholding sales referenced here are detailed year by year in Cross-Shareholdings, and the real estate leverage line is covered in Real Estate Development.

Shareholder return policy: ordinary dividends plus flexible returns

Policy	Detail
Basic policy	Maintain stable dividend payments over the long term
Ordinary dividends	DOE (dividend on equity ratio) adopted from the Medium-Term Business Plan 2022 to emphasize stable, medium- to long-term returns based on equity built up through retained profit; from FY2023, ordinary dividends are paid based on a target DOE of around 5%
Flexible shareholder returns	Additional returns delivered flexibly based on necessary equity and profit levels; purchase of treasury shares planned at a scale of ¥100.0bn by the end of FY2026, starting in February 2025

DOE (dividend on equity ratio) is calculated as total annual dividends (interim plus year-end) divided by the average of equity at the start and end of the fiscal year. It is a different yardstick from the more familiar dividend payout ratio, which measures dividends against profit rather than against the equity base.

The dividend history below shows the shift in policy: dividend per share (DPS) rose steadily but slowly through the Medium-Term Business Plan 2017 period, then climbed sharply once DOE-based dividends and larger flexible returns took hold under the Medium-Term Business Plan 2022 (MTP2022, see Medium-Term Plan 2022 Strategy). Figures for DOE before FY2023 are shown for reference only, since the DOE target was not yet formally in place.

Fiscal Year	Dividend per Share	Total Dividends Paid	DOE	Dividend Payout Ratio
FY2014	¥10	¥7.1bn	1.6%	25.0%
FY2018	¥32	¥22.9bn	3.2%	20.3%
FY2021	¥32	¥22.9bn	2.4%	58.7%
FY2022	¥42	¥30.1bn	3.1%	38.8%
FY2023	¥75	¥53.8bn	5.0%	71.6%
FY2024	¥81	¥57.9bn	5.0%	39.9%
FY2025	¥88	¥60.9bn	5.1%	35.3%
FY2026 (Forecast)	¥94	—	5.0%	41.2%

Alongside ordinary dividends, Obayashi has also begun returning cash through share buybacks, which lift the total payout ratio (dividends plus buybacks, as a share of profit) well above the dividend payout ratio alone.

Fiscal Year	Treasury Share Purchases	Total Payout Ratio
FY2024	¥11.9bn	48.1%
FY2025	¥58.0bn	68.5%

A buyback works differently from a dividend: instead of paying cash directly to shareholders, Obayashi repurchases and typically retires its own shares, which mechanically reduces the share count and so supports EPS and ROE per remaining share, on top of whatever ordinary dividend is paid. The scale stepped up sharply between the two years shown — from ¥11.9bn in FY2024 to ¥58.0bn in FY2025 — consistent with the ¥100.0bn buyback program the company began in February 2025 and plans to complete by the end of FY2026.

What this means for investors

The dividend on equity ratio is worth understanding on its own terms: rather than promising a fixed share of profit each year, Obayashi is promising a fixed return on the equity base itself, topped up with flexible buybacks when profit and equity levels allow. FY2025’s ROE of 14.4% and DOE of 5.1% (see MTP2022 KPIs) already run ahead of this page’s 10% and “around 5%” targets, which is the same equity overshoot that motivates the ¥100.0bn buyback. For where the cash for dividends and buybacks fits into the group’s broader five-year cash plan, see Cash Allocation; for the cross-shareholding sales that help fund it, see Cross-Shareholdings. Read as a pair, pages 27 and 28 make the case that Obayashi’s capital policy is no longer purely reactive: it starts from an explicit ROE target above its own cost of equity, and works backward to a dividend, buyback and equity-management program designed to hit it.

This article is part of our complete breakdown of the Obayashi Investors’ Guide 2026. See the hub article for the full series.

Note: This article is a factual summary based on Obayashi Corporation’s published IR material (Investors’ Guide, June 2026 edition). It is not a recommendation to buy or sell any security. Figures are as of the publication of the source material. Investment decisions are your own responsibility.