[Click e-Stock] "IBK's Dividend Appeal Stands Out... Target Price Raised"

On July 17, Kiwoom Securities stated regarding Industrial Bank of Korea (IBK), "The appeal of cash dividends will become more prominent," and raised its target price from 23,000 won to 26,000 won. The firm also maintained its "Buy" investment rating.

Kim Eungap, a researcher at Kiwoom Securities, said on the same day, "Consolidated net profit for the second quarter of this year is expected to increase by 8.3% year-on-year, indicating that stable earnings improvement will continue." He also pointed out, "While the reinforcement of shareholder returns through cash dividends has sometimes been viewed as a weakness, the attractiveness of cash dividends could be highlighted if policies such as the separate taxation of dividend income are revised."

Last year, the bank's payout ratio was 35% on a separate financial statement basis and 32% on a consolidated basis. The payout ratio on a consolidated basis is also expected to rise to 35%.

Kim explained, "Second-quarter consolidated net profit is expected to reach 658.4 billion won, an increase of 8.3% compared to the same period last year. We have raised our forecast by 2.3%, reflecting a greater increase in foreign currency translation gains due to the decline in exchange rates." For this year, consolidated net profit is expected to be 2.82 trillion won, up 0.4% from the previous forecast and 5.9% higher than last year.

He continued, "IBK's shareholder return policy has been carried out through dividends without share buybacks or cancellations. It is true that, in comparison to the growing trend of share buybacks among other bank stocks, this has been perceived as a weakness in IBK's shareholder return policy." He added, "However, as shareholder returns are being strengthened solely through dividends, the dividend yield is gradually becoming more differentiated." The dividend per share for last fiscal year reached an all-time high of 1,065 won, an increase of 8.4% year-on-year.

Kim added, "If tax reforms related to the separate taxation of dividend income are implemented, IBK's investment appeal as a company that increases shareholder return rates through cash dividends could be firmly established. If a payout ratio of 35% becomes the standard for separate taxation, IBK already reached this level last year on a separate financial statement basis and recorded 31.9% on a consolidated basis."