KOSPI Listed Companies' Net Profit Falls 12%... "Still Dividend Stocks Until Year-End"

[Image source=Yonhap News]

[Asia Economy Reporter Myung-hwan Lee] Amid a more than 10% decline in the cumulative net profits of companies listed on the Korea Composite Stock Price Index (KOSPI) compared to the same period last year, securities experts have advised focusing on dividend stocks until the end of this year.

According to the Korea Exchange on the 18th, the cumulative net profit of KOSPI-listed companies up to the third quarter of this year stood at 113.2192 trillion won, down 12.35% from the same period last year. Operating profit margin and net profit margin were 7.02% and 5.43%, respectively, decreasing by 1.63 percentage points and 2.28 percentage points compared to the same period last year. Looking at the third-quarter results alone, the decline is even more significant. Operating profit of KOSPI-listed companies in the third quarter fell 30.35% year-on-year to 39.3666 trillion won, and net profit dropped 37.04% to 27.6733 trillion won.

Despite this situation, the securities industry forecasts that dividend stocks will attract bargain buying until the end of this year. This is because investors are expected to flock to secure profits before the ex-dividend date. According to Shinhan Investment Corp., the ‘KOSPI High Dividend 50’ index, a thematic index composed mainly of high dividend stocks, recorded an excess return of 3.6 percentage points over the index in the fourth quarter of last year. As the domestic stock market showed weakness, this index, which had fallen to the 2400 level at the end of last month, recovered to 2601.07 on the 17th, returning to the 2600 level. The index consists of large-cap stocks such as Samsung Electronics, Hyundai Motor, Kia, and financial sector stocks including KB Financial Group, Shinhan Financial Group, and Hana Financial Group.

There is also advice that stability can be expected as dividend stocks have shown decent returns in past cases. Lee Jung-bin, a researcher at Shinhan Investment Corp., said, "The KOSPI High Dividend 50 index has shown outstanding cumulative returns from 2021 to the present and has recorded favorable performance compared to the beginning of 2022," adding, "As concerns about inflation and interest rate hikes increase, the appeal of stable dividend stocks will be highlighted."

Among dividend stocks, dividend growth stocks are also diagnosed to have the best performance. This is because their loss defense appeal is prominent in a downturn market. Kang Song-cheol, a researcher at Eugene Investment & Securities, said, "The ‘Dividend Aristocrats’ investment strategy, which selects stocks with high dividend yields among companies that have consecutively increased dividends for 4 to 5 years annually, has significantly outperformed market returns over the long term," and predicted, "If the relative strength phase of ‘quality stocks’ that steadily increase dividends continues, the outperformance of dividend aristocrat stocks will persist in Korea as well."

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