[Salty Dividends]② Only 9 High Dividend Stocks Including HD Hyundai and Hana Financial

9 Companies with 3-Year Average Dividend Yield Over 5%
All Financial Firms Except HD Hyundai and KT&G

Editor's NoteOne of the factors causing the "Korea Discount," which refers to the undervaluation of the Korean stock market, is the so-called "stingy dividends." Although domestic listed companies are increasing dividends, Korea still carries the label of the "lowest dividend country" among major nations. The financial authorities are trying to reform the dividend system by deciding dividends first and confirming shareholders later, but these efforts are insufficient. The fundamental problem lies in the passive attitude of companies toward shareholder returns. The dividend payout ratio is low. We analyzed the total cash dividends and dividend payout ratios of the top 100 companies by market capitalization over the past three years to examine the current state of dividends in domestic companies.

[Asia Economy Reporter Minji Lee] In the domestic stock market, stocks with a dividend yield exceeding 5% are generally called "high dividend stocks." Companies that have recorded a dividend yield of over 5% for three consecutive years are considered proactive in shareholder returns.

However, an analysis by Asia Economy of the average dividend yields over the past three years (2019-2021) of the top 100 companies by market capitalization in Korea found that only nine companies had dividend yields exceeding 5%. Even these were concentrated in specific industries. Among the nine companies, seven were financial firms such as financial holding companies, card companies, and securities firms. The non-financial companies were the investment holding company HD Hyundai and KT&G.

HD Hyundai Tops with a Dividend Yield of 6.9%

Among the nine companies, HD Hyundai had the highest average dividend yield over three years. The dividend yield was recorded at 6.9%. After recording 5.2% in 2019, it steadily increased to 5.9% in 2020 and reached 9.6% in 2021. Although HD Hyundai posted losses in 2020 and 2021, it used 261.4 billion KRW and 392.2 billion KRW respectively as dividend funds, increasing the dividend per share (DPS) from 3,700 KRW to 5,500 KRW. This was in line with the announcement of a three-year dividend policy in 2018 to provide shareholders with dividends exceeding 3,700 KRW per share and to strengthen shareholder return policies by distributing a significant portion of net profits until 2021. Securities firms estimate that HD Hyundai's dividend yield last year also reached around 5.7%, supported by the strong performance of its subsidiaries.

Among financial firms concentrated with high dividend stocks, Hana Financial Group (5.9%) and NH Investment & Securities (5.9%) had the highest dividend yields. They were followed by Industrial Bank of Korea (5.8%), Samsung Securities (5.7%), Samsung Card (5.3%), Meritz Securities (5.1%), and Korea Financial Group (5%). Financial firms with an average dividend yield above 4% included Meritz Fire & Marine Insurance (4.8%), Woori Financial Group (4.7%), Shinhan Financial Group (4.6%), Meritz Financial Group (4.6%), Samsung Fire & Marine Insurance (4.5%), DB Insurance (4.5%), and KB Financial Group (4.5%).

Among these, Meritz Financial Group is actively engaging in shareholder returns by maintaining share buybacks and dividend yields in the 4-5% range. Last year, after incorporating Meritz Fire & Marine Insurance and Meritz Securities as wholly owned subsidiaries of Meritz Financial Group, it announced plans to maintain a shareholder return ratio in the 50% range for over three years. Nam Min-wook, a researcher at DS Investment & Securities, analyzed, "Since the financial authorities have mentioned guaranteeing autonomy in shareholder returns, the high dividend tendency can be maintained."

Companies with low average dividend yields include Kakao (0%), L&F (0%), NAVER (0.2%), and EcoPro BM (0.3%). It can be said that investing in Kakao or L&F stocks over the past three years yielded no dividend income. A low dividend yield means that the company's stock price is overvalued or the dividend payout ratio (the proportion of cash dividends to net profit) is low. Kakao and NAVER are representative stocks with high valuations but showed low cash dividend payout ratios, ranking at the bottom in terms of yield. Kakao earned 155.6 billion KRW in profit in 2020 but allocated only 12.9 billion KRW for dividends. In 2021, despite a large profit of 1.3921 trillion KRW, the total cash dividend was only 22.9 billion KRW. The average cash dividend payout ratio over three years was only 3.7%. NAVER's three-year average cash dividend payout ratio was also low at 1.1.

Of course, a high dividend yield or payout ratio does not necessarily mean a company has high investment value. For example, an excessively high dividend yield may indicate a falling stock price, which suggests reasons for a decline in the company's valuation. Also, companies with high dividend payout ratios should be carefully examined. A high ratio means the company prioritizes dividends over investments, which could lead to financial deterioration in the future and affect corporate value.