Year-End Dividend Stock Investment Strategy: "When to Buy and When to Sell"

[Asia Economy Reporter Lee Seon-ae] As volatility in the domestic stock market increases, investors' attention is focusing on year-end dividend stocks that can offer stable returns. Experts predict that mid-December is the optimal time to invest in dividend stocks.

According to KB Securities on the 5th, choosing which dividend stocks to buy to satisfy the desire for confirmed year-end returns is not difficult; rather, the timing of buying and selling is more important. It is advisable to buy not too late and to sell before the ex-dividend date if the stock price rises.

There is a dilemma with year-end dividend stocks. If you buy just before the ex-dividend date, the loss on the ex-dividend day becomes fixed. However, if you buy too early, you are exposed to market risk for a longer period. If the stock price rises before the ex-dividend date, the price drop on the ex-dividend day can be offset, which is favorable, but the opposite can also happen.

Kim Min-gyu, a researcher at KB Securities, said, "To determine the best time to buy dividend stocks, we examined performance based on purchase timing and found that buying too early at the beginning of the month or buying just before the ex-dividend date after Christmas were not good choices. Considering risk and return, the balanced buying period is between the latter half of the second week and the third week of December."

Analysis of dividend returns since 2011 shows that buying 16 to 20 days before the ex-dividend date yields high total returns but also high volatility, while buying 1 to 6 days before results in low volatility but also low total returns, underperforming the market. Buying 7 to 15 days before the ex-dividend date showed stable risk-adjusted performance.

The timing of selling dividend stocks should be decided based on stock price gains. Dividend returns are almost certain unless the DPS is suddenly reduced. Therefore, after buying dividend stocks, the only factor that can affect 'Total Return = stock price gain + dividend return' is the stock price gain. To increase stock price gains, one must consider 'when and how to sell.' If you bought dividend stocks at year-end and the stock price rises or falls, your performance will differ depending on whether you sell before or after receiving the dividend.

Researcher Kim said, "For 'super high dividend stocks' with dividend yields exceeding 3.8%, if the stock price rises more than the dividend yield before the ex-dividend date, it is better to sell before the ex-dividend date without receiving the dividend. For super high dividend stocks where the price has risen but not as much as the dividend, it is better to receive the dividend on the ex-dividend date and then sell. For super high dividend stocks whose prices have fallen, it is advantageous to receive the dividend on the ex-dividend date and cut losses," he diagnosed. He advised that 'general high dividend stocks' with dividend yields between 2.4% and 3.8% should be sold with a time lag slower than super high dividend stocks.

Industries expected to yield year-end dividends include financial stocks such as securities, banks, and insurance, as well as telecommunications stocks. Financial stocks are expected to offer super high dividends ranging from 4% to as much as 8%.

By stock, super high dividends are expected from Samsung Securities and Kumho Petrochemical. According to Quantwise and KB Securities, Samsung Securities’ expected dividend yield reaches 8.4%, while NH Investment & Securities (7.2%), Daishin Securities (7.2%), Kumho Petrochemical (7.0%), DGB Financial Group (6.7%), Samsung Card (6.5%), Samsung Fire & Marine Insurance (6.5%), BNK Financial Group (6.5%), KT&G (5.7%), and KT (5.3%) are also estimated to have high dividend yields.