[Beginner's Guide] Attention to 'Dividend' News During Shareholders' Meeting Season... How to Receive 'Dividends'?

[Asia Economy Reporter Kwon Jaehee] The last week of March is the 'Super General Meeting Day.' Among 2,426 listed companies, 1,546 have announced that they will hold their regular general meetings of shareholders from the 28th to the 31st. A noticeable trend during the shareholder meeting season is shareholder-friendly policies, with an increasing number of listed companies mentioning plans to raise 'dividends.' What exactly are dividends, and how can you receive them?

What are Dividends?

Dividends refer to the portion of a company's earnings that is paid out to shareholders based on their ownership stake. It is important to note that dividends are paid from the profits a company earns. Conversely, if a company does not make a profit, there is no possibility of dividends.

[Image source=Yonhap News]

How Much Dividend Can You Receive? 'Dividend Payout Ratio'

So, how much dividend can you actually receive? Of course, the amount a company earns annually and its dividend payout ratio will vary.

The dividend payout ratio represents the percentage of net profit that a company distributes as dividends over a year. The higher this number, the more money is returned to shareholders as dividends. For example, if a company has an annual net profit of 10 billion KRW and a dividend payout ratio of 20%, it means 2 billion KRW will be paid out as dividends. Dividing this 2 billion KRW by the number of shares issued by the company gives the dividend per share.

When Should You Buy Stocks to Receive Dividends?

The timing of purchasing stocks is also important to receive dividends. To receive dividends, you must hold the stocks until the dividend record date, which is the date when shareholders are registered in the shareholder registry. Typically, the dividend record date is December 30, and it takes two days to register shareholders. Therefore, if you buy stocks before the market closes on December 28, you will be eligible to receive dividends.

Dividends are paid within one month from the date of the regular general meeting of shareholders.

On the 17th, the 52nd Samsung Electronics Annual General Meeting of Shareholders is being held at the Suwon Convention Center in Yeongtong-gu, Suwon-si, Gyeonggi Province. / Suwon = Photo by Kim Hyun-min kimhyun81@

Are Dividends Paid Only Once a Year?

To conclude, no. While year-end dividends are common, some companies pay quarterly dividends. Representative companies include Samsung Electronics and POSCO. Financial stocks have also announced plans for quarterly dividends.

Why Do Stock Prices Drop on the Ex-Dividend Date?

More companies are announcing quarterly or interim dividends to minimize volatility around dividend dates that occur annually. This is called the ex-dividend date. As explained earlier, to receive dividends, you must hold the stock two days before the dividend record date. For example, if a company called A Electronics has a dividend record date of December 30, you must hold the stock until the 28th. But what if you buy the stock on the 29th? You would not be eligible for dividends by just one day. The day when the right to receive dividends is lost, like the 29th, is called the ex-dividend date, and stock prices typically fall on this day. This is because many shareholders sell their stocks immediately after receiving dividends, once the dividend record date has passed.

What Are Some Representative Dividend Stocks?

While buying stocks with a high dividend payout ratio is important, it is also crucial that the company consistently generates profits to pay dividends. Traditionally, stable dividend stocks are those of companies that maintain steady performance regardless of economic conditions.

Representative sectors include banking, insurance, and telecommunications. Banks, which recorded record-breaking earnings last year, showed high dividend payout ratios of 26-27%. Insurance and telecommunications stocks are also preferred as dividend stocks because these industries are less sensitive to economic cycles and have the ability to consistently generate cash flow.

Editor's Note [Beginner's Guide to Stocks] is a smart investment guide for 'Joorini' (stock + beginner). We will explain unfamiliar stock stories to beginners in a kind and easy-to-understand manner.

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