Cold Wind Blows Through Stock Market... Attention Shifts to High Dividend Stocks Like Securities and Banks

Improved Dividend System Allows Investment After Confirming Dividend Amount
Continued Downgrade of Listed Companies' Earnings Estimates
Interest in High Dividend Stocks with Improving Performance and Strengthened Dividends

As the cold wind begins to blow, voices recommending high-dividend stocks with high dividend yields are growing louder. Several listed companies have changed their articles of incorporation to allow shareholders to confirm dividends and invest at the general meeting of shareholders held in March this year. This is expected to move away from the previous method of investing until the end of the year based on the expected dividend amount calculated from the past dividend yield. Many quick investors are investing first in listed companies that are likely to increase dividends considering this year’s performance improvement and dividend payout ratio.

According to the Korea Listed Companies Association on the 15th, as of March, about 26% of companies listed on the KOSPI, totaling 636 companies, have changed their dividend procedures to allow investment after confirming dividends. This change follows the Financial Services Commission and the Ministry of Justice’s authoritative interpretation of the Commercial Act (Article 354) announced earlier this year, stating that companies can determine shareholders eligible for dividends after finalizing the dividend amount at settlement. Earlier, KB Financial Group changed its articles of incorporation related to dividends at the regular shareholders' meeting in March this year. The clause stating "Dividends shall be paid to shareholders or registered pledgees listed in the shareholder registry as of the end of each settlement period" was changed to "The board of directors may set a record date to determine shareholders eligible for dividends by resolution." KB Financial Group explained that this was to establish a basis for the board resolution regarding the dividend record date.

Most large dividend-paying listed companies, including financial holding companies such as Shinhan, Hana, and Woori, as well as Hyundai Motor and POSCO Holdings, have changed their articles of incorporation related to the dividend record date. Previously, the record date was earlier than the confirmation of the dividend amount. The dividend record date was at the end of this year, but the dividend amount was decided at the board meeting in February next year, so investors had to invest without knowing the dividend amount. In response, the Financial Services Commission and the Ministry of Justice improved the system so that the dividend record date can be set after the dividend amount is finalized.

The delay of the dividend record date from the end of this year to March next year does not mean that year-end dividend stock investors are invalid. On the contrary, interest in dividend stocks with significant potential to increase dividends after confirming third-quarter performance is expected to grow.

Kang Song-cheol, a researcher at Eugene Investment & Securities, said, "The change in the dividend disclosure system has rekindled investors' interest in dividends and is expected to lead to an expansion of corporate dividend payout ratios in the mid to long term," adding, "The dividend payout ratio of domestic listed companies is relatively low." He continued, "We expect dividend increases from companies with good performance and dividend capacity but low payout ratios," and added, "It is a time to pay attention to companies that can increase dividends this year based on recent performance trends."

Lee Kyung-soo, a researcher at Hana Securities, also analyzed, "Earnings estimates for KOSPI-listed companies continue to be revised downward until next year," and said, "This situation highlights the 'scarcity' of earnings." He emphasized, "In a situation where everyone’s performance is poor, differentiated strong performance will act as a catalyst for concentrated demand," and "An upward revision in earnings is likely to lead to an increase in dividends per share (DPS)."

The securities sector index has risen 11.3% this month. Although stock market volatility has increased, one of the reasons for the rise in the securities sector index can be attributed to dividend expectations. Yoon Yoo-dong, a researcher at NH Investment & Securities, said, "The elimination of price fluctuation uncertainty due to year-end ex-dividend dates is a positive institutional improvement for both securities companies and investors," and predicted, "Securities companies will need to expand dividends to enhance stock attractiveness, so shareholder return efforts will be further strengthened." He estimated, "The combined controlling net profit of five securities companies?Samsung Securities, Kiwoom Securities, Korea Financial Group, Mirae Asset Securities, and Daishin Securities?is expected to increase by 8.6% to 2.9 trillion won compared to last year," and expressed hope that "actively utilizing the system that allows investment decisions after confirming dividend amounts will enhance their appeal as dividend stocks." Samsung Securities and Kiwoom Securities presented dividend payout ratios of 35% and 30%, respectively.

Not only securities stocks but also bank stocks are showing dividend appeal. Until the third quarter of this year, domestic commercial banks’ profits have maintained a relatively favorable level compared to other industries. Despite the economic recession, they have achieved good performance and are strengthening shareholder return policies, making them an indispensable sector for dividend stock investment. Kim Ji-young, a researcher at Kyobo Securities, said, "Financial stocks have maintained active shareholder return policies over the past few years," and analyzed, "Banks are expected to be one of the sectors with higher price-to-earnings ratios compared to the stock market."