Stock Market on Thin Ice... Should We Consider Hot Dividend Stocks?

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[Asia Economy Reporter Myunghwan Lee] Amid increased downside volatility in the domestic stock market recently, securities analysts have highlighted the need to focus on dividend stocks ahead of the December year-end settlements of listed companies. The yield and defensive nature of dividend stocks were also presented as advantages.

On the 22nd, Korea Investment & Securities analyzed, "Dividend stocks attract attention when the weather gets chilly." This is because about 98% of domestic listed companies have December fiscal year-ends, and the dividend record dates are also concentrated at the end of December.

Along with this seasonal factor, Korea Investment & Securities pointed out that the yield itself is an attraction of dividend stocks. Currently, the 3-year government bond yield is 4.2%, which is higher than the KOSPI dividend yield of 2.2%. However, the dividend yields of KOSPI high dividend stocks (7.0%) and KOSPI dividend growth stocks (4.7%) exceed the government bond yield. Korea Investment & Securities explained that the dividend yields of dividend stocks have become higher than market interest rates due to the overlap of rising interest rates and falling stock prices.

The defensive appeal of dividend stocks remains as well. According to Korea Investment & Securities' analysis, dividend stocks have shown lower volatility and a defensive nature in past markets. In four representative cases since 2001 when the domestic stock market was bearish, dividend stocks performed relatively well during the downturns.

However, Korea Investment & Securities also noted that the magnitude of gains during rebound periods is not large. If only the periods when the stock index rebounds are considered, the performance of dividend stocks may seem weak. But when both the downturn and rebound periods are cumulatively evaluated, dividend stocks have shown superior performance, according to Korea Investment & Securities.

Researcher Dongchan Yeom of Korea Investment & Securities advised, "The characteristic of dividend stocks to fall less and rise less may seem boring, but it achieves stable cumulative returns," adding, "In a situation where uncertainty still remains in the stock market, dividend stocks can be an alternative."

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