[Practical Finance] Up to 50% Returns... Should You Try Investing in 'Dividend Stock Funds'?

Net Assets Decreased This Year but Some Fund Inflows at Year-End
'Woori Jungsohyeong Gobaedang Fund' Attracts Attention with Outstanding Returns through Stock Differentiation

[Asia Economy Reporter Minji Lee] As the KOSPI, which showed a sharp rise last month, entered a pause phase this month, the number of investors moving assets to dividend stocks before the ex-dividend date (the stock price state where the right to receive dividends for that year is lost after the fiscal year-end) is increasing. This year's ex-dividend date is the 29th, so stocks must be purchased by the 28th to secure dividend yields. However, if it is difficult to find high-dividend stocks on your own, joining a dividend stock fund can be an alternative.

According to financial information company FnGuide on the 16th, the 'Baring High Dividend Plus Securities Investment Trust' among dividend stock funds investing in domestic stocks saw an inflow of 10.9 billion KRW over the past month as of the 13th. Over three months, 19 billion KRW flowed in, and considering that there was an outflow of 118.8 billion KRW since the beginning of the year, it is analyzed that funds have recently shifted to a net inflow trend.

In addition, notable fund inflows over the past month were seen in 'NH-Amundi High Dividend Stock Securities Investment Trust' (3.8 billion KRW), 'Mirae Asset High Dividend Focus Securities Investment Trust' (3 billion KRW), 'Korea Value 10-Year Investment Dividend Securities Investment Trust' (1.5 billion KRW), and 'Woori Love Our Children High Dividend Securities Investment Trust' (1.3 billion KRW).

The net assets of 269 dividend stock funds set up domestically stand at 11.0437 trillion KRW, down about 3.5 trillion KRW compared to a year ago. After the COVID-19 pandemic, as the stock market boomed and the KOSPI approached the 2800 level, redemption demand for profit-taking and the desire to pursue higher returns than dividends through direct investment intertwined. Over the past six months, a total of 2.56 trillion KRW was withdrawn, causing heavy redemptions. However, as the year-end dividend season approaches, the number of investors seeking dividend profits through dividend stock funds is increasing, and fund assets are estimated to have slightly increased compared to before.

The returns did not significantly match those of other equity funds. This is analyzed to be due to the characteristics of dividend stock funds that pursue portfolios mainly of blue-chip stocks and the relatively low returns caused by large-scale redemptions. The year-to-date return of dividend stock funds was 9.76%, significantly lower than the year-to-date return of domestic equity funds (29.25%) and also lower than that of overseas equity funds investing in foreign assets (19.45%).

However, among individual funds, some achieved outstanding returns through stock differentiation. For example, the 'Woori Small and Mid-Cap High Dividend Securities Investment Trust' posted a year-to-date return of 54.47%. This fund invests more than 60% of its assets in undervalued small and mid-cap stocks. Its portfolio includes MedPacto (5.94%), SK Hynix (4.01%), Hyundai Motor (3.63%), Doosan Fuel Cell (3.44%), Samsung SDI (2.95%), Naver (2.64%), Oscotec (2.30%), Chunbo (2.27%), KINX (2.22%), and ST Pharm (2.17%) in that order. Typically, dividend stock funds hold Samsung Electronics at a 15-20% weighting, but this fund has a higher weighting in undervalued small and mid-cap stocks.

Other funds maintaining high returns include 'NH-Amundi 4th Industrial Revolution Pension Securities Convertible Investment Trust' (44.3%), 'VI Good Choice Dividend Securities Investment Trust' (39.9%), 'HDC Aljja Dividend Securities Investment Trust' (33.8%), and 'Hyundai Investment Small and Mid-Cap Dividend Stock Securities Investment Trust' (32%).

Meanwhile, the market expects an increase in investors engaging in dividend stock investments between the second and third weeks of December. This period is when the risk of loss from ex-dividend dates in year-end dividend stock investments can be diversified, and the inflow of financial investors influencing stock price rises can be the greatest. As of the end of this month, the KOSPI dividend yield is estimated at 1.68%, and the KOSDAQ index is expected to record 0.48%.

Kim Min-gyu, a researcher at KB Securities, explained, "So far, the buying trend of financial investments toward high-dividend stocks is not greater than in the past, so supply and demand are expected," adding, "Investing in dividend stocks just before the ex-dividend date should be avoided as total returns may decrease due to stock price volatility."