[Practical Finance] The Season of Dividends Returns... "Find High Dividend Stocks with Solid Performance"

[Asia Economy Reporter Lee Seon-ae] As the year-end approaches, investors' interest in dividend stocks is increasing. With the downward pressure on the stock market intensifying due to uncertainties such as interest rate hikes and economic recession, the 'year-end dividend season in December' is expected to gain more attention as a safe haven. Although the attractiveness of stock dividends has declined due to rising bank deposit rates following the base interest rate hikes, experts advise that high-dividend stocks accompanied by profit growth are the most rational investment alternative in an uncertain market environment. They unanimously recommend paying attention to companies that consistently pay dividends based on stable profits.

◆Expected Dividend Yield of '9%' Draws Attention

On the 23rd, the securities industry agreed that the dividend stock investment strategy remains valid until the end of the year. Lee Jung-bin, a researcher at Shinhan Investment Corp., said, "The KOSPI High Dividend 50 Index recorded a cumulative excess return of 3.6 percentage points over the KOSPI in the fourth quarter of last year," adding, "During this period, the base effect and low volatility were favorable, and the KOSPI High Dividend 50 Index outperformed the KOSPI in the fourth quarters of both 2020 and 2021."

Looking at the sector composition of the KOSPI High Dividend 50 Index, excluding Samsung Electronics, financials account for the highest at 69%. Next are materials and consumer staples, accounting for 18% and 8%, respectively. Within financials, banks, insurance, and securities make up 66%, 18%, and 15%, respectively.

Yeom Dong-chan, a researcher at Korea Investment & Securities, emphasized, "Dividend stocks that fall less and rise less may seem boring, but they achieve stable cumulative returns," adding, "In a situation where uncertainty still remains in the stock market, dividend stocks can be an alternative."

According to FnGuide, among listed companies with estimates from three or more securities firms, Woori Financial Group (9.18%) and JB Financial Group (9.04%) were noted for having expected dividend yields exceeding 9% (as of the closing price on the 18th). Following them were DGB Financial Group (8.92%), BNK Financial Group (8.83%), Industrial Bank of Korea (7.85%), Hana Financial Group (7.71%), mainly bank stocks with high expected dividend yields in the 7-8% range. Dividend yield is calculated by dividing the dividend per share (DPS) by the stock price.

◆Profit Growth + High Dividends 'Optimal Investment'

Dividend stocks with improving earnings are also mentioned as good investment alternatives. The researcher said, "Recently, the attractiveness of dividend stocks seems to have been diluted as heavily oversold growth stocks rebounded due to short covering, but dividend plays remain valid until the ex-dividend date at the end of the year," advising, "It is necessary to focus on stocks with high dividend scores and improving earnings."

Related stocks include KT&G, Hana Financial Group, Woori Financial Group, Meritz Fire & Marine Insurance, Cheil Worldwide, Hyundai Marine & Fire Insurance, LX International, Korea Asset Trust, and Hansol Paper. All these stocks are within the KOSPI High Dividend 50 and show positive 1-month and 3-month earnings per share (EPS) growth rates, expected operating profit growth rates for this year, and an expected return on equity (ROE) of over 10%.

Stocks with an expected dividend rate of over 5% this year and increased net profit compared to last year include JB Financial Group, BNK Financial Group, Woori Financial Group, SK Square, IBK Industrial Bank, S-Oil, Samsung Card, Hana Financial Group, and HD Hyundai.

Han Ji-young, a researcher at Kiwoom Securities, said, "In preparation for a deeper-than-expected recession and strong inflation, it is appropriate to secure a certain portion of dividend stocks in the stock portfolio," noting, "From the perspective of dividend yield, it still maintains an attractive level compared to government bond yields."

It is also important to select dividend stocks with long-term profit growth potential. When filtering high-dividend stocks whose operating profit forecasts for next year have been revised upward compared to a month ago, not only major banks such as Hana Financial Group and KB Financial Group but also non-bank stocks like LX International, SK Telecom, and GS stood out.

Dividends are the distribution of net profits earned by companies to shareholders evenly. Usually, domestic companies have their fiscal year-end in December, so based on this, companies calculate the profits earned over the year and decide how much dividend to pay. The decided dividends are usually paid to investors in April of the following year.

The timing of stock purchases is important to receive dividends. To receive dividends from companies with a December fiscal year-end this year, shareholders must be registered in the shareholder registry by the dividend record date. Usually, the dividend record date is December 30. Stocks must be purchased by December 28, two days before the dividend record date. This is because in Korea, the actual settlement occurs two trading days after the stock purchase. As long as your name is on the shareholder registry on the dividend record date, you can sell the stocks afterward and still receive the dividends. However, if you purchase stocks after the dividend record date, the right to receive dividends disappears.

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