Dividend Stocks Yield Solid Returns... Relative Profitability Increases in Sharp Downturns

"Concerns Over Dividend Cuts Due to COVID-19, but Dividend Yield Expected to Remain High Even After Adjustments"
Focus on High Dividend Stocks with Earnings Momentum Rather Than Simply Low Stock Prices

[Asia Economy Reporter Oh Ju-yeon] Due to the novel coronavirus infection (COVID-19) crisis, stock prices of listed companies have plummeted, resulting in relatively higher dividend yields. Financial holding companies, considered representative dividend stocks, have dividend yields reaching the 9% range, with some stocks even hitting 14%. Although there are concerns that dividends may be reduced due to COVID-19, analyses suggest that even after reflecting this, the dividend yields of dividend stocks will maintain a high level.

According to financial information firm FnGuide on the 31st, based on closing prices as of the 26th, the average dividend yield of domestic listed companies this year was analyzed to be 3.32%. This figure is calculated based on the expected dividend per share (DPS) for 2020. It is interpreted as a result of stock prices sharply falling due to COVID-19 amid a recent trend of companies increasing their dividends per share.

The company with the highest dividend yield is Doosan. Doosan maintains an annual dividend per share at around 5,200 KRW, and if it is estimated to maintain this level this year as well, the dividend yield is 14.21%. Following is Kumho Industrial with 9.98%. Despite poor performance last year, Kumho Industrial maintained its existing dividend level, paying 500 KRW for common stock and 550 KRW for preferred stock. This year, securities firms estimate Kumho Industrial’s dividend per share at 567 KRW.

Financial holding companies that have been raising dividends annually also show high dividend yields. Including DGB Financial Group (9.91%), Hana Financial Group (9.33%), and Woori Financial Group (9.15%), all exceed 9%, while Shinhan Financial Group (6.76%) and KB Financial Group (6.73%) are expected to surpass the 6% range.

Securities stocks, which are expanding dividends to enhance shareholder value, are also noteworthy. Meritz Securities (8.29%), NH Investment & Securities (7.78%), and Samsung Securities (6.90%) are representative examples. Additionally, traditional high dividend stocks such as Ssangyong Cement (9.51%) and Hyosung (8.36%) have seen their dividend appeal increase further due to stock price declines.

In situations where stock price drops are significant, high dividend stocks can be a partial alternative, according to prevailing opinions. However, rather than approaching dividend stocks simply because their prices have fallen, the consensus is to focus on high dividend stocks accompanied by earnings momentum such as sales growth rate and net profit growth rate.

Lee Jung-bin, a researcher at IBK Investment & Securities, analyzed, "Currently, as the KOSPI is bottoming out, it is appropriate to set a goal for an additional rebound within three months and engage in short-term trading of high dividend stocks considering net cash ratio relative to market capitalization and earnings momentum."

Park So-yeon, a researcher at Korea Investment & Securities, emphasized, "Although an earnings shock in the first half of the year is inevitable for domestic listed companies due to COVID-19, raising concerns about dividend cuts this year, despite downward revisions of dividend per share estimates, dividend stocks are still expected to maintain high dividend yields. Therefore, it is time to pay attention to dividend stocks that can provide stable dividends."