Daishin Securities Report
[Asia Economy Reporter Myunghwan Lee] Recently, amid increased volatility in the domestic stock market due to a strong dollar and recession concerns, securities firms have advised paying attention to monthly dividend exchange-traded funds (ETFs).
Daishin Securities analyzed on the 1st, "Using the ETF structure to somewhat defend the downside or enduring volatile markets through monthly dividend products can be an alternative."
According to Daishin Securities, as market volatility expanded last month, domestically listed equity ETFs showed a decline compared to the previous month regardless of country or sector. Daishin Securities explained that when a general weakness without any rising sectors appears, as in last month's market situation, investing in market indices weakens the diversification effect. They also pointed out that if one has set an installment investment strategy in domestic and U.S. stock markets, buying a basic S&P 500 index ETF might be burdensome.
In this situation, Daishin Securities advises utilizing market index ETFs listed with various structures. The idea is to continue investing in domestic and U.S. market indices as per the existing strategy but to withstand volatile markets through monthly dividend products.
Currently, there are a total of 10 monthly dividend ETFs listed on the domestic stock market. Demand for monthly dividend ETFs has been high in the U.S. this year, but domestically, until July, all ETFs paid dividends quarterly. Between August and September, existing ETFs either changed their dividend payment cycles or newly listed ETFs adopted monthly dividend strategies.
The three monthly dividend ETFs first listed in September all include U.S. stocks. However, since their asset mixes and strategies differ, they can be used according to purposes such as downside protection, asset allocation, or monthly dividend income, Daishin Securities explained. These ETFs include 'TIGER Miguk Nasdaq 100 Covered Call (Synthetic)', 'TIGER Global Multi-Asset TIF Active', and 'SOL Miguk S&P 500', according to Daishin Securities.
Two REITs ETFs that previously did not pay dividends switched to monthly dividend payments starting from the 22nd of last month. Since these products are currency-hedged (risk-averse) types, Daishin Securities analyzed that they are suitable for investment when the Korean won appreciates against the dollar. 'KODEX Dow Jones U.S. REITs (H)' and 'KODEX TSE Japan REITs (H)' fall into this category. The 'TIGER U.S. MSCI REITs (Synthetic H)', which invests in U.S. REITs, also changed its dividend policy from quarterly to monthly payments.
Three ETFs employing a covered call strategy on the KOSPI 200 index also switched to monthly dividend payments. However, it is advised to consider that the dividend policy change is still in its early stages and that the management fees are high. Kim Hae-in, a researcher at Daishin Securities, analyzed, "Since the policy was changed to monthly payments not long ago, dividends may not be consistent every month," adding, "The fact that total fees are generally higher compared to basic ETFs is a factor to consider when investing."
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