Should We Aim for 5% Dividend Income with ARIRANG High Dividend Stock ETF?

[Asia Economy Reporter Hwang Yoon-joo] Hanwha Asset Management recommended that if investors missed the optimal timing for dividend stock investment at the end of last year, they can still invest in dividends through ETFs in April. By purchasing the largest high-dividend stock ETF in Korea, 'ARIRANG High Dividend Stock,' by April 27, the day before the ex-dividend date, investors can receive dividend payments in early May.

The ‘Hanwha ARIRANG High Dividend Stock ETF’ paid investors dividend yields of 5.21% annually in 2020 and 4.59% annually in 2021. It is expected to pay a high dividend yield of around 5% again this year.

ETFs collect cash dividends generated from the stocks held in their portfolio and distribute them as dividends. ETF managers accumulate dividends and interest income sequentially as cash assets and make lump-sum dividend payments, with the highest dividend payments occurring in April.

Since 2016, the dividend yields of KOSPI-listed companies have exceeded the one-year fixed deposit interest rate, increasing the attractiveness of dividend stocks. In particular, Korea’s four major financial groups recorded record-high net profits in 2021 and are expected to pay dividends that increased by 64% compared to the previous year. The 'ARIRANG High Dividend Stock' ETF has a financial sector weighting of approximately 64.53%.

The net asset value of 'ARIRANG High Dividend Stock' is 204 billion KRW, making it the largest high-dividend stock ETF in Korea. Its cumulative return over the past six months was 4.76%, and 15.25% over one year. During the same period, the KOSPI fell by 7.74% and 14.28%, respectively.

Kim Sung-hoon, Head of the ETF Business Division at Hanwha Asset Management, said, "Dividend stocks are considered relatively safe investment options to secure cash flow amid increased market volatility. Given the domestic and international uncertainties such as inflation and interest rate hikes this year, if value stocks like financials and energy emerge as new market leaders, investors can expect stable dividend income along with high capital gains through high-dividend stocks."