Food Industry's 'Strong Earnings' Lead to Solid Dividends... 'Opaque Dividends' Remain a Challenge

Food Industry Increasing Dividends Backed by Strong Performance
Passive on Calls to Improve 'Dark Dividend' Practices

The food industry, which has been criticized for being stingy with shareholder dividends, is now increasing dividends based on last year's strong performance, aiming to enhance shareholder value. However, it appears that the industry is still not proactive in addressing demands to improve the so-called ‘dark dividends,’ where investors do not even know how much dividend they will receive when investing.

According to the Financial Supervisory Service's electronic disclosure system on the 6th, Lotte Wellfood's dividend for last year was 3,000 KRW per common share, a 30.4% increase from 2,300 KRW a year earlier. During the same period, the total dividend amount rose from 20.3 billion KRW to 26.5 billion KRW, and the dividend yield increased by 0.6 percentage points from 1.8% to 2.4%. The dividend yield is an indicator showing the dividend amount relative to the stock price on the dividend record date. Since the dividend yield varies depending on the reference stock price, if the stock price falls, the dividend yield rises, and a higher dividend yield generally indicates a higher dividend payout tendency of the company. In the stock market, companies with a dividend yield of 5% or more are generally classified as high-dividend stocks.

Amid the K-food boom, Lotte Wellfood achieved strong performance last year thanks to robust global business and improvements in its operating structure. Lotte Wellfood's sales last year reached 4.0664 trillion KRW, up 26.9%, and operating profit rose 57.5% to 177 billion KRW. Overseas subsidiary sales exceeded 800 billion KRW for the first time, increasing their share of total sales to around 20%. Including domestic export volumes, overseas sales are estimated at 970 billion KRW last year. In particular, the Indian subsidiary drove sales with ‘Lotte Choco Pie’ capturing over 80% market share, laying the foundation for dividend payments.

Major Food Companies' Financial Results and Dividend Status

Besides Lotte Wellfood, companies like Orion and Samyang Foods, which are showing growth in overseas markets, are also enhancing shareholder value by raising dividends based on record performances last year. Orion's sales in China last year reached 1.369 trillion KRW, surpassing the 1.1739 trillion KRW earned in Korea. Samyang Foods increased its export ratio to 70%, recording sales of 1.1929 trillion KRW and operating profit of 146.8 billion KRW, surpassing 1 trillion KRW in sales and 100 billion KRW in operating profit for the first time since its founding.

Orion increased its dividend per common share from 950 KRW in 2022 to 1,250 KRW last year, a 31.6% rise, and the total dividend amount grew from 37.6 billion KRW to 49.4 billion KRW, an increase of over 10 billion KRW. Samyang Foods' year-end dividend jumped 83.3% from 600 KRW to 1,100 KRW, with total year-end dividends rising from 4.5 billion KRW to 8.2 billion KRW. Including the interim dividend of 1,000 KRW, the total dividend per share last year was 2,100 KRW, a 50% increase from 1,400 KRW the previous year. Additionally, CJ Freshway, Lotte Chilsung Beverage, and Binggrae also increased their dividends.

Despite these dividend increases, some food companies are still criticized for being stingy with shareholder dividends. Nongshim, for example, recorded an operating profit of 212 billion KRW last year, nearly a 90% increase and its highest annual performance, yet it froze dividends. The dividend per share remained at 5,000 KRW for the second consecutive year, and the total dividend amount stayed the same at 28.9 billion KRW. Meanwhile, CJ CheilJedang, the largest food company in the industry, maintained its dividend policy despite deteriorating performance last year. CJ CheilJedang's dividend last year was 5,500 KRW in total, combining a year-end dividend of 2,500 KRW and quarterly dividends of 3,000 KRW, the same level as the previous year. CJ CheilJedang's sales last year were 29.0235 trillion KRW, down 3.5% from the previous year, and operating profit decreased by 22.4% to 1.2916 trillion KRW.

The industry still appears not to be proactive in improving the so-called ‘dark dividends.’ Domestic listed companies have been criticized for the ‘dark dividend’ practice, where shareholders entitled to dividends are determined first at year-end, and the dividend amount is finalized at the shareholders' meeting held the following year. As a result, investors had to invest without knowing how much dividend they would receive and accept the dividend decided at the shareholders' meeting. In response, in January last year, financial authorities announced measures to improve the dividend process through interpretations of the Commercial Act and amendments to the Capital Markets Act, allowing investors to confirm dividends before deciding to invest. Specifically, the dividend record date, which determines the shareholders entitled to dividends, would be moved to after the dividend amount is finalized.

However, relatively few companies have proposed amendments to their articles of incorporation to separate the voting rights record date and the dividend record date at this year's regular shareholders' meetings. So far, companies including Hyundai Green Food, Orion, Binggrae, and Samyang Foods have announced through disclosures that they will propose amendments related to the dividend record date. The main point is to revise the articles of incorporation so that the board of directors sets the dividend record date after the dividend amount is finalized. The amended articles of incorporation approved at this shareholders' meeting will apply from the next dividend. However, many companies have yet to convene shareholders' meetings, so the number of companies participating in resolving the ‘dark dividend’ issue is expected to increase.

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