"Farmers' Share Shrinking"... Will NongHyup Financial Take the Lead in Interim Dividends?

Confirmed at 20% Following Financial Authorities' Guidelines

[Asia Economy Reporter Kiho Sung] NongHyup Financial Group has decided on a dividend payout ratio of 20% following the financial authorities' recommendation. The reduction in the dividend payout ratio inevitably leads to a decrease in the amount of support for farmers, strengthening the speculation that NongHyup Financial may proceed with an interim dividend.

According to the financial sector on the 28th, NongHyup Financial held a board meeting on the 26th and finalized the 'Approval of the 2020 Financial Statements and Business Report (Draft),' including the dividend plan, as an agenda item for the shareholders' meeting. The dividend payout ratio resolved at this board meeting is 20%, which is expected to be finalized through the shareholders' meeting vote on the 31st.

NongHyup Financial's dividends are transferred 100% to the NongHyup Central Association. These dividends are then distributed to members through local NongHyup cooperatives. Since the funds are used for projects that provide practical assistance to farmers, such as fertilizer and pesticide costs and warehouse support, a reduction in the dividend payout ratio inevitably results in a decrease in support funds for farmers.

NH NongHyup Financial recorded a net profit of 1.7359 trillion KRW last year, down 43.7 billion KRW from 1.7796 trillion KRW the previous year. With a 20% dividend payout ratio, the dividend amount is estimated to be about 347.2 billion KRW. Considering that the previous year had a payout ratio of 28.1% and a total dividend of 500 billion KRW, this represents a reduction of over 150 billion KRW. Due to the dividend restriction, farmers lose about 150 billion KRW in income opportunities.

For this reason, there is growing speculation that NongHyup Financial may consider an interim dividend to support farm operations. In fact, the articles of incorporation of NongHyup Financial provide a basis for implementing interim dividends. According to Article 54 of the NongHyup Financial articles of incorporation, ‘During each business year, the board of directors may resolve once to set a specific date to pay an interim dividend to shareholders in accordance with Article 462-3 of the Commercial Act.’ However, it is a concern that since the financial holding company was established in 2012, no interim dividends have ever been paid.

A financial sector official said, "NongHyup Financial's dividends are used 100% for farmers without any outflow abroad," adding, "Because reducing dividends clearly harms farmers, they will likely accept the authorities' recommendation as much as possible for now and increase dividends after the guideline ends in June."

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