[Beginner's Guide to Stock Investment] The Return of Shareholders' Meeting Season... What Are the Key Points to Watch?

Editor's Note[Joorini Guide] is a smart investment guide for 'Joorini' (stock + beginner) investors. We will kindly and easily explain stock stories that may be unfamiliar to Joorini.

[Asia Economy Reporter Kwon Jaehee] Recently, if you look at disclosures, you may often see announcements related to shareholder meetings.

Usually, companies hold shareholder meetings in the last week of March, which is called 'Super Shareholders' Meeting Day.'

If you are a Joorini, you probably own at least one share of a listed company.

What should you pay attention to at the shareholder meeting?

From the highlight of shareholder meetings, dividends, to the activist funds frequently appearing in recent news, we will share information that becomes more valuable the more you know during the shareholder meeting season.

The Highlight of Shareholder Meetings: 'Dividends'

Dividends mean paying a portion of the profits earned by a company to shareholders according to their shareholdings.

The important point is when the company has made a profit.

If the company has recorded a loss, the possibility of dividends is considered low.

Then, how much dividend can you actually receive?

To know how much dividend you can get, you need to look at the 'payout ratio.'

The payout ratio indicates the proportion of net profit earned by the company in a year that is paid out as dividends.

The higher this number, the more money is returned as dividends.

For example, if a company has an annual net profit of 10 billion KRW and a payout ratio of 20%, it means 2 billion KRW is paid as dividends.

If you divide this 2 billion KRW by the number of shares issued by the company, you get the dividend per share.

Then, one more thing. Can every shareholder receive dividends?

No.

To receive dividends, the timing of purchasing the shares must also be considered.

To receive dividends, you must hold the shares until the dividend record date, which is the date when shareholders are registered in the shareholder registry for dividend payment.

Usually, the dividend record date is December 30, and it takes two days to register in the shareholder registry.

In other words, you must buy the shares before the market closes on December 28 to receive dividends.

Dividends are usually paid within one month from the regular shareholder meeting date.

Raising Voices: 'Shareholder Activism'

Every shareholder meeting season, company executives become very tense.

This is because activist funds, which are gaining strength, and small shareholders raising their voices at shareholder meetings exist.

These are collectively called 'shareholder activism'.

Shareholder activism means shareholders actively participating in corporate decision-making to pursue shareholders' rights and interests.

Especially, it includes not only dividends, which are directly linked to shareholders' interests, but recently also actions such as replacing management and restructuring by holding management accountable for poor performance, directly intervening in management to increase shareholder value.

What is an 'Activist Fund'?

You may have heard the term 'activist fund' frequently appearing in news related to shareholder activism.

In particular, Align Partners, which often appears in the current management dispute of SM Entertainment, is known as a representative activist fund.

First, the formal name of activist funds is 'activist hedge funds.'

They are strategic investors (hedge funds) who become shareholders of specific companies by purchasing stocks and actively engage in management to increase the value of the company and their holdings.

Opinions on the activities of activist funds are divided.

Activist funds are positively evaluated for enhancing shareholder interests by targeting governance and accounting opacity, which were main causes of the Korea discount, and raising corporate value.

In fact, the average stock price increase rate of companies targeted by activist funds was about 14 percentage points higher than the index.

SM Entertainment is a representative example.

After Align Partners' shareholder proposal earlier this month, SM surged by as much as 82.4%.

Ostem Implant also recorded an increase of over 35% after becoming a target of activist funds.

However, the activities of activist funds do not always bring positive results.

They sometimes seek short-term profits, which can undermine the company's competitiveness in the long term.

Because of this, they also have a negative image as 'corporate raiders.'

[Image source=Yonhap News]

Dear Joorini,

In the upcoming shareholder meeting season, dividends directly related to our interests, as well as shareholder activism by small shareholders including activist funds, are important points to observe.

It would be worthwhile to see how and how much they represent our interests.

Furthermore, if we small shareholders, the Joorini, actively raise our voices, I believe it will be a foundation for a healthier and more mature capital market.

We support your wise investments today as well, and conclude this article here.

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This article is from [Joorini Guide], published weekly by Asia Economy. It explains stock-related financial news and difficult economic stories in an easy and friendly way so that stock beginners can understand. By clicking subscribe, you can receive articles for free.

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