[GLOBAL ECONOMIC TIMES] As the end of the year approaches, interest in dividend stocks increases. Foreign and institutional investors continue to buy financial and telecommunication stocks, which are considered high dividend stocks. There are also expectations that the dividend payout ratio will improve through the value-up program during the interest rate cut phase.
According to the Korea Exchange on the 23rd, the top 20 stocks net purchased by foreign investors this month (October 2nd to 23rd) were KB Financial Group (KRW 119.8 billion), KT (KRW 98.5 billion), Woori Financial Group (KRW 79.5 billion), and Samsung Life Insurance (KRW 76.9 billion). ), Shinhan Financial Group (47.3 billion won), and many other financial and telecommunication stocks. During the same period, financial stocks such as KB Financial Group (KRW 86.9 billion), Hana Financial Group (KRW 39.7 billion), and Meritz Financial Group (KRW 33.8 billion) were among the top net purchases by institutional investors.
As funds flow into dividend stocks, ETFs containing financial stocks are also on the rise. This month, Shinhan Asset Management's SOL Financial Holding Plus High Dividend ETF rose more than 7%. KB Financial Group (93,200 won ▼1,100 -1.17%), Shinhan Financial Group (55,800 won ▼500 -0.89%), Hana Financial Group (64,200 won ▼200 -0.31%), Woori Financial Group (16,540 won ▼50 -0.30%), This product contains a total of 10 financial stocks, including Meritz Financial Group (104,900 won ▲1,600 +1.55%).
Mirae Asset Global Investments' TIGER Bank High Dividend Plus TOP 10 ETF also rose by more than 7% during the same period. It consists of major financial holding companies, as well as Industrial Bank of Korea (14,480 won 0.00%), Samsung Life Insurance (101,100 won ▲2,000 +2.02%), and Samsung Fire & Marine Insurance (353,500 won ▼12,000 -3.28%). Contains telecommunication stocks such as KT&G (108,300 won ▲800 +0.74%), SK Telecom (57,500 won ▲800 +1.41%), KT (43,300 won ▲600 +1.41%), and LG U+ (9,930 won ▲30 +0.30%). Hana Asset Management's HANARO high dividend ETF also recorded a rise of around 3%.
Most companies listed on the domestic stock market have their dividend base dates at the end of December, so usually in October and November, demand for investments targeting dividends increases and dividend stock prices tend to rise. However, with the change in the authoritative interpretation of the Commercial Act last year, from the 2023 settlement dividend, the dividend record date, which was previously the end of the year, can be changed to after the general shareholders' meeting. Accordingly, predictions have been raised that the dividend effect at the end of the year may decrease compared to previous years, but the strategy of ‘dividend stocks when the cold wind blows’ still appears to be effective.
First of all, the interest rate cut is acting as a positive factor. When interest rates fall, companies' financing costs decrease and their ability to pay dividends increases. Investors' demand is also shifting to dividend income rather than interest income. On the 18th of last month, the U.S. Federal Reserve lowered the base interest rate by 0.5 percentage points from 5.25 to 5.5 percent to 4.75 to 5 percent. The Bank of Korea's Monetary Policy Committee also lowered the base interest rate from 3.5% to 3.25% per annum on the 11th.
The possibility of an improvement in dividend payout ratio due to the value up program is also adding to expectations for dividend stocks. Dong-chan Yeom, a researcher at Korea Investment & Securities, predicted, “It is difficult to say that Korea’s dividend payout ratio is higher than in the past,” and added, “With the importance of value-up programs and shareholder value enhancement increasing, the dividend payout ratio will gradually improve.”
Over the past 10 years, KOSPI's average dividend yield has risen from 1.7% to 1.9% based on the most recent year's dividend. KOSPI 200's dividend yield also increased from an average of 1.8% over the past 10 years to 2.1% over the past year. Researcher Yeom analyzed, “Dividend stocks can take a positive approach in a situation that requires a defensive market response.”
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