Monthly Consistent 'Monthly Dividend ETF' Returns Are 'Disappointing'

[Practical Investment] Reasons for the Popularity of Monthly Dividend ETFs
Ideal for Building Seed Money with Spare Change Investment
However, the Returns Are Disappointing

On the 11th, dealers were working in the dealing room of Hana Bank in Euljiro, Seoul. On that day, the KOSPI index opened at 2193.02, down 39.82 points (1.78%) from the previous trading day. The won-dollar exchange rate opened at 1428.0, up 15.6 won. Photo by Moon Honam munonam@

[Asia Economy Reporter Junho Hwang] The recent trend of 'monthly dividends' in financial products can be understood in the context of 'spare change investment.' It is attractive because it involves 'Seed Money' that allows for a 'gathering small amounts to make a mountain' strategy. However, the fact that monthly dividend ETFs cannot overcome recent financial market waves is a serious consideration for investors.

The Secret Behind the Popularity of Monthly Dividend ETFs

Sumin Park, Head of ETF Product Team, Shinhan Asset Management

Park Sumin, head of the ETF product team at Shinhan Asset Management, who introduced the first monthly dividend exchange-traded funds (ETFs) to the domestic market, diagnosed, "After COVID-19, the era of growth stocks has faded, and the demand for stable income investment returns is expanding mainly among young investors." He added, "Investors were willing to go through the trouble of combining S&P 500 ETFs with different distribution cycles to receive monthly dividends while investing in the U.S. benchmark index S&P 500. To provide a solution to this, we launched the ‘SOL U.S. S&P 500 ETF.’"

Among existing overseas Korean investors, there were quite a few looking for monthly dividend ETFs. These investors had been selecting ETFs to receive dividends every month, and with the introduction of ETFs that pay monthly dividends domestically, a path for them to settle has been established.

Monthly dividend ETFs are also gaining attention among senior investors. Park said, "For senior investors who have entered the 'withdrawal era' from the 'accumulation era' of pension assets, using the monthly dividends paid by ETFs as a source for withdrawals can be efficient," adding, "This can reduce the hassle of having to sell assets held within the pension for withdrawals."

Yoon Jaehong, a researcher at Mirae Asset Securities, analyzed, "The core of monthly dividend ETFs lies in generating more predictable and responsive cash flows. When expecting the same annual dividend, the monthly dividend format allows for shock dispersion and more flexible responses in case of negative issues such as dividend cuts."

Disappointing Returns, Can They Outperform the Market?

On the 11th, dealers were working in the dealing room of Hana Bank in Euljiro, Seoul. On that day, the KOSPI index opened at 2193.02, down 39.82 points (1.78%) from the previous trading day. The won-dollar exchange rate opened at 1428.0, up 15.6 won. Photo by Moon Honam munonam@

One disappointing aspect is the returns. Although these are monthly dividend products, only a limited number have recorded returns that outperform the market. Dividends are paid, but stock prices have fallen, resulting in weak returns.

Looking at the 3-month returns of monthly dividend ETFs, except for SOL U.S. S&P 500 (4.37%), TIGER U.S. S&P 500 Dividend Aristocrats (3.97%), and TIGER U.S. Dow Jones 30 (3.60%), all others have recorded negative returns. In particular, TIGER 200 Covered Call ATM (-10.60%), TIGER U.S. MSCI REITs (Synthetic H) (-13.34%), and KODEX Dow Jones U.S. REITs (H) (-13.99%) are showing double-digit negative returns.

An industry insider explained, "Most products are not focused on theme stocks or specific stocks but are based on market representative indices, so it is difficult to generate special profits in a market environment like the recent deep waves." However, they added, "Considering these are long-term investment products using pension accounts, now might be a good time for bottom-fishing purchases."

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