Hanwha Asset Management, 'PLUS Gobaedangju Weekly Covered Call'... "First Dividend Payment of 130 KRW per Share"

Hanwha Asset Management announced on the 4th that it has paid the first dividend for the weekly dividend exchange-traded fund (ETF) ‘PLUS Gobaedangju Weekly Covered Call’. The first dividend was 130 KRW per share, with a distribution rate of 1.23% as of the 28th of last month, which annualized amounts to 14.8%.

The ‘PLUS Gobaedangju Weekly Covered Call’ ETF invests in the same underlying assets as the domestic dividend stock ETF ‘PLUS Gobaedangju’ while combining a KOSPI 200 weekly call option selling strategy to provide investors with high dividend income.

The dividend sources of this ETF mainly consist of ‘dividend income’ from the constituent stocks and ‘cash premiums’ earned through weekly call option sales. First, the ‘dividend income’ is the money paid as dividends by each company in which the ETF invests as underlying assets, and a 15.4% dividend income tax is imposed when receiving the dividend.

On the other hand, dividends derived from the ‘cash premiums’ earned through call option sales are tax-exempt. Unlike overseas markets, capital gains from trading domestic exchange-traded derivatives are not taxed, offering a significant tax-saving advantage compared to overseas covered call ETFs.

In fact, out of the 130 KRW dividend paid this time, only 8 KRW is subject to taxation. When investors invest through a general securities account, 122 KRW is treated as tax-exempt, and only the 8 KRW dividend income is taxed, resulting in excellent tax efficiency.

A call option refers to the ‘right to buy a specific asset at a predetermined price at a future date’. The buyer of a call option pays a premium to the seller in exchange for the right to buy. Conversely, the call option seller receives the premium as compensation for the obligation to fulfill the contract if the buyer exercises the option.

The ‘PLUS Gobaedangju Weekly Covered Call’ ETF sells short-term (near expiry) weekly options twice a week, which have a low likelihood of excessive obligation, thereby collecting premium income a total of eight times per month.

Amid recent increased volatility and sideways movement in the domestic stock market, the ‘PLUS Gobaedangju Weekly Covered Call ETF’ has shown superior performance compared to the market. Since its listing on August 13, the return as of the previous day was 3.11%, outperforming the KOSPI 200’s 0.5% during the same period.

This performance is attributed to the government’s various policies to resolve the ‘Korea discount’, improvements in corporate governance by domestic companies, shareholder return policies, and increased dividend payout ratios, all of which have intensified efforts to enhance corporate value starting this year, thereby increasing the attractiveness of domestic high-dividend stocks.

Geum Jeongseop, Head of the ETF Business Division at Hanwha Asset Management, said, “While overseas covered call products mainly invest in highly volatile stocks such as big tech and the Nasdaq index and pay annual dividends of around 15%, PLUS Gobaedangju Weekly Covered Call invests in relatively less volatile domestic dividend stocks while providing similar dividend payments. Since income from weekly option sales is tax-exempt, the after-tax yield is higher compared to overseas covered calls.”