High Returns with Volatility Avoidance... Should We Consider Holding Dividend Stocks?

Shinhan Investment Corp. Report

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[Asia Economy Reporter Lee Myunghwan] Recently, as the domestic stock market has experienced increased volatility due to concerns over an economic recession, securities analysts have suggested that it may be worthwhile to pay attention to dividend stocks.

Shinhan Investment Corp. analyzed on the 15th, "The reason investors prefer dividend stocks is due to volatility control and high dividend yields."

According to Shinhan Investment Corp., dividend stocks have relatively lower volatility compared to other stocks, which makes them attractive to investors. Another advantage is that dividend yields provide a certain buffer against the risk of stock price declines. They also pointed out that dividend stocks possess both value stock and low-volatility characteristics, which can maximize excess returns from dividend stocks in situations where market volatility increases.

According to Shinhan Investment Corp., a high-dividend low-volatility strategy has historically delivered better returns than high-dividend performance stocks in the market. The portfolio focused on high dividends and low volatility outperformed the KOSPI 200 high-dividend index and successfully defended returns even during recent downturns. Given the possibility of further volatility expansion due to upcoming Federal Open Market Committee (FOMC) meetings of the U.S. Federal Reserve (Fed) in the second half of this year, they advised that responding with dividend stocks is a rational approach.

Shinhan Investment Corp. expects that demand for dividend stocks will increase further as the high-interest-rate environment is expected to continue for some time. The slowdown in the real economy is expected to become visible from the end of the fourth quarter this year, and it is likely that demand will shift toward dividend stocks, which have relatively lower volatility.

Researcher Lee Jungbin of Shinhan Investment Corp. said, "If a shallow recession accompanies the high-interest-rate environment and a stock market crash does not occur in the short term, the probability that dividend stocks will outperform increases," adding, "It is worth trying to generate returns by utilizing the seasonality of volatility control and maximizing dividend stock returns before the ex-dividend date by the end of this year."

Shinhan Investment Corp. also diagnosed that among dividend stocks, the dividend attractiveness of bank stocks is increasing.

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