Dividends

 

Fund evaluator Zeroin said on Oct. 1 that 51 Korean dividend stock funds recorded an average one-year yield of 1.18 percent as of the preceding day, whereas that of the 40 foreign dividend stock funds available in Korea was -3.44 percent. By country and region, European funds posted a return of -1.79 percent, and those that invest mainly in the United States and Asia-Pacific countries such as Australia, Hong Kong, Taiwan, and Singapore recorded -2.65 percent and -9.40 percent, respectively. Japanese funds were the only group that enjoyed a higher return than Korean.

“Although the bearish domestic stock market is dragging down the yield of dividend stock funds these days, these type of funds are likely to benefit from Korean companies’ higher payout ratio in the long term, and their performance is expected to be much improved as the stock market rebounds in the future,” said a fund manager, adding, “Meanwhile, foreign dividend stock funds are likely to be limited in terms of excess profits, because many of them are funds of funds.”

An interesting point is that dividend stock fund performances are contrary to domestic and foreign enterprises’ dividend yield ratios. According to Thomson Reuters IBES, Korean companies’ dividend yield ratio is estimated at 1.6 percent for this year, while the figures are as high as 3.9 percent for British, 3.2 percent for French, 2.8 percent for Germany, 3.4 percent for Taiwanese, 3.1 percent for Chinese, and 2.0 percent for American. However, Korean companies are showing a better dividend stock fund performance as of late.

This is because of a difference in portfolio configuration. Larger corporations account for larger portions of the foreign funds, but a number of smaller firms with higher payout ratios are also found in the Korean dividend stock funds, which result in excess profits during the recent domestic stock market rally led by small and medium enterprises. In addition, preferred stocks gained much during the course of the daily price limit adjustment, from 15 percent to 30 percent, and Korean companies paid more intermediate dividends recently, while their performances turned for the better.

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