The Season of 'Baedangju' Arrives... Which Hidden Gem Stocks Yield Over 5%?

KRX High Dividend 50 Index Up 6.8% from Last Month
19 KOSPI and 1 KOSDAQ Companies... 20 Expected
Ssangyong Cement 8.04%·Hyundai Heavy Industries Holdings 7.2%

[Asia Economy Reporter Minji Lee] As the year-end approaches, interest in dividend stocks is increasing. Although the domestic stock market has shown strength by surpassing the 2500 mark this month, investment sentiment toward dividend stocks, which are relatively stable investment options during December when market volatility typically decreases, is expected to expand.

According to the Korea Exchange on the 17th, the KRX High Dividend 50 Index closed at 2145.91 the previous day, up about 6.8% compared to the 16th of last month. This index is composed of 50 stocks with high dividend yields selected from companies listed on the KOSPI and KOSDAQ markets, and the recent recovery of interest in dividend stocks is analyzed as the reason for the index's upward trend.

Jongjin Moon, a researcher at Kyobo Securities, said, "While value and dividend stocks tend to outperform growth stocks, interest in dividends is expected to continue as the year-end dividend season approaches. In a situation where companies are expected to reduce dividend amounts due to COVID-19, it is important to select companies with strong dividend payment capacity and high sustainability of dividends."

According to financial information provider FnGuide, 20 listed companies are expected to record a dividend yield (consensus) of 5% or higher this year. Based on stock prices as of the 26th of last month, 19 companies were listed on the KOSPI market and one on the KOSDAQ market. Generally, stocks with dividend yields exceeding 3% are called dividend stocks, and those reaching 5% are called high dividend stocks.

The company expected to have the highest dividend yield is Ssangyong Cement. Ssangyong Cement is expected to pay a dividend of 446 KRW per share this year, resulting in a dividend yield of 8.04%. Hyundai Heavy Industries Holdings is also expected to pay 18,083 KRW per share, showing a dividend yield of 7.2%. Following them are Kumho Industrial (6.45%), Hyosung (6.34%), Hana Financial Group (6.05%), Industrial Bank of Korea (5.94%), Samsung Securities (5.68%), BNK Financial Group (5.60%), and NH Investment & Securities (5.57%) in order of high dividend yields. Most companies expected to offer high dividends this year are financial firms such as banks and securities companies with stable earnings.

Dividend yield refers to the ratio of dividends per share. It is calculated by dividing the dividend per share by the stock price at the given time, serving as an indicator of the level of dividend income. Due to the impact of COVID-19 this year, stock prices of companies have dropped significantly, causing some companies' dividend yields to appear higher than the previous year. Hyundai Heavy Industries Holdings' dividend yield expanded from 5.47% (18,500 KRW) last year to the 7% range, although the dividend amount slightly decreased compared to last year. Financial companies such as Hana Financial Group (5.69%, 2,100 KRW) are also expected to pay similar dividends as last year, but their yields appear higher.

However, looking at the dividend yields of listed companies over the past three years, the number of companies offering high dividends above 5% has significantly decreased. Especially among KOSDAQ companies, the number of firms offering high dividends has declined. This year, the only KOSDAQ-listed company expected to offer high dividends is GS Home Shopping, which is expected to pay 7,000 KRW per share, resulting in a dividend yield of 5.03%. Previously, in 2018, 47 companies offered dividends above 5%, including 22 KOSDAQ companies classified as high dividend firms, and last year, 66 companies paid dividends exceeding 5%, with 24 of them being KOSDAQ companies.

In the securities industry, since interest in dividend stocks was relatively low this year, demand is expected to increase toward the year-end. KB Securities researcher Euntak Lee said, "The proportion of dividend stocks in stock portfolios was small this year, and institutions also reduced dividend stock demand due to redemptions of dividend stock funds. The December market is expected to be a resting period, and while dividend stocks may not deliver overwhelming performance, they are estimated to achieve returns above the market average."