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Japan's largest initial public offering (IPO) this year, Kyushu Railway, turned out to be just the ticket for the country's yield-starved investors, taking the fast track higher on its debut on Tuesday.

The stock jumped to as high as 3,120 yen ($29.88), or a 20 percent surge from its IPO price of 2,600 yen. It was trading at 2,954 yen at 9:50 a.m. HK/SIN.

The company raised around 416 billion yen, or around $4 billion through the IPO as the government privatized part of its railway system, the first railway listing since the 1990s.

Despite other listed railway plays tumbling this year – West Japan Railway's shares were down around 22 percent year-to-date – Kyushu Railway offered investors one key attraction: A forecasted dividend of around 75 yen, for a yield of around 3 percent. For investors such as Japan's archetypal Mrs. Watanabe, that compared favourably with the 10-year Japanese government bond yield, which was at negative 0.054 percent on Tuesday morning.

Analysts noted strong demand for yield.

"There's huge appetite for these assets," Peter Boardman, managing director at NWQ Investment Management, told CNBC's "The Rundown" on Tuesday. "You have to remember these are utility companies and, in Japan, the normal power utility companies have sustainable dividends. So transportation, telecoms, these are highly regarded assets by the Japanese public."

But he added that while most transportation companies wouldn't offer much in the way of growth, especially in demographically challenged Japan, Kyushu Railway was also a real-estate play. He noted that around 30 percent of its revenue and 50 percent of its profit came from real estate.

"Kyushu is considered the gateway to Japan. Seventy-five percent of all cruise ships that come to Japan actually stop in Kyushu. There's been a huge amount of inbound tourism coming to Kyushu from Korea and Taiwan and China, so in terms of the growth opportunities, the real estate side is actually quite attractive," he said. "Over the next three years you're going to see a lot of free cash flow being generated on the hotels and condominiums and apartment complexes that have already been invested."

Around a quarter of the IPO shares were allocated for foreign investors.

But while Kyushu Railway's dividend may be attractive to Japan's yields-starved investors, it wasn't clear how much it would interest overseas investors. One analyst noted, however, that the offering may just be too big for foreign investors to ignore.

"From a foreign investor's perspective, generally speaking, investment into Japan is not really seen as a huge yield-enhancer," Naomi Fink, CEO at Europacifica Consulting, told CNBC's "Squawk Box" on Tuesday.

But she noted that Japan's stock market was one of the world's largest.

"I think Japan remains an extremely important diversification play," she said. "From a foreign investors standpoint, you can't overlook the diversification benefits of investment into Japan and given this offer is a massive one, I would anticipate there is at least some interest from overseas investors."

First Published:Oct 25, 2016 9:23 AM IST