[Click eStock] "Deposit interest rates below 1%... High dividend stocks becoming more attractive"

[Asia Economy Reporter Oh Ju-yeon] Daishin Securities analyzed that with the Bank of Korea's base interest rate cut (0.5%), the interest rates on deposit products will likely be lower than now, which could increase investors' interest in high-dividend stocks.

According to Daishin Securities on the 1st, the average 12-month deposit interest rate of 52 products disclosed by the Korea Federation of Banks as of the 29th of last month was 1.01%. Among these, about half, or 25 products, had deposit interest rates below 1%.

Researcher Jo Seung-bin predicted, "Deposit interest rates below 1% will raise investors' interest in dividend-type products."

Researcher Jo explained, "Currently, the relative index of the high-dividend index compared to the KOSPI is below the 2012 low level," adding, "From a price perspective, the investment attractiveness of high-dividend stocks has increased."

The reason the high-dividend index has shown weakness compared to the KOSPI since the beginning of this year is due to concerns about dividends caused by poor corporate earnings in 2019. The net profit of KOSPI-listed companies in 2019 decreased by 47.4% compared to the previous year.

However, contrary to concerns, the total cash dividends of the KOSPI in 2019 decreased by only 2.9%. This was because the dividend payout ratio of the KOSPI in 2018 was low at 23.7%, and the free cash flow also recorded about 33 trillion won, leaving room to maintain dividends.

This year, KOSPI net profit is expected to grow by 27.5%. Researcher Jo assessed, "Although corporate earnings revisions continue downward due to the novel coronavirus infection (COVID-19), the base effect makes it unlikely that net profit will decrease compared to the previous year."

He said, "Since the KOSPI hit its low on March 19, the KOSPI has rebounded 39.2%, and during the same period, the high-dividend index rose 40.9%," adding, "While the KOSPI succeeded in rebounding mainly on growth stocks expected to benefit after COVID-19, the performance of dividend stocks has also been favorable." He emphasized, "Due to increased price attractiveness and dividend yields that are attractive compared to market interest rates, investors' interest in dividend stocks may rise again."

This content was produced with the assistance of AI translation services.