(Bloomberg) -- Japanese trading firm Sumitomo Corp. said it will buy back its stock and adopt a progressive dividend policy, bringing it in line with the other four major peers in an effort to boost shareholder returns.

The company will allocate ¥700 billion ($4.5 billion) of returns over the next three years, with a goal of total shareholder return ratio of 40%, the company said Thursday in a filing. The announcement comes after activist investor Elliott Management Corp. was said to have built a “large” stake in Sumitomo and shared with the company its views on ways to create shareholder value.

The stock rose 4.4% at the close, extending a record high. Sumitomo is also aiming a return on equity of at least 12% for the fiscal year ending March 2027, and will buy back up to ¥50 billion worth of shares.

“This looks like a good commitment to deliver strong returns over several years step-by-step rather than a big bang announcement with all the good news out at once,” said Mio Kato of LightStream Research. The new plan should give investors time to digest and understand the company’s potential, “and the outlook feels quite positive without a sense of massive over-promising.”

Japanese companies have been facing pressure from the stock exchange and activists like Elliott to announce plans to improve capital efficiency. Real estate firm Mitsui Fudosan Co. released a plan in April to sell assets and increase buybacks, two months after news of Elliott’s stake in the firm.

Elliott Said to Have Large Stake in Buffett-Favored Sumitomo

Sumitomo President Shingo Ueno declined to comment on Elliott’s reported stake, but added that the company has a fair disclosure policy and is “in talks with a wide range of investors and shareholders.” 

“We will continue to reflect those voices from stakeholders in our management,” Ueno said at a briefing in Tokyo. The company is still in talks with Berkshire Hathaway, but there aren’t business opportunities that have materialized between the two firms yet, he said. 

Sumitomo’s shares briefly jumped as much as 7.6% on heavy volume following the release of its mid-term plan and earnings. Shares of major trading houses have surged over the past year, benefiting from Warren Buffett’s Berkshire Hathaway taking a stake in the companies. 

Sumitomo Corp FY Net Income Forecast Beats Estimates

Buffett said in his February letter to investors that the Japanese trading houses he invests in, including Sumitomo, follow shareholder-friendly policies that are “superior” to those practiced in the US.

(Adds context of activist investors in Japan)

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