Passive Dividend Payment

KOSPI-listed companies’ dividend payout ratio continued to rise for four years in a row, from 15.59% to 18.35%, 20.66% and 22.81% between 2012 and last year.
KOSPI-listed companies’ dividend payout ratio continued to rise for four years in a row, from 15.59% to 18.35%, 20.66% and 22.81% between 2012 and last year.

 

It has been found that KOSPI-listed companies’ dividend payout ratio continued to rise for four years in a row, from 15.59% to 18.35%, 20.66% and 22.81% between 2012 and last year.

Still, the dividend payout ratio in the South Korean stock market is much less than those of companies listed on other stock markets. According to Bloomberg, the ratio reached as high as 58.7% in Britain, 48.0% in France, 46.8% in Taiwan and 39.0% in Germany last year, when the percentage was 17.6% in South Korea. In addition, the dividend rates in Britain (4.21%), Germany (2.76%), the United States (2.15%), Taiwan (4.04%) and China (1.75%) were higher than that in South Korea in 2015.

Such a passive dividend payment by South Korean companies has reduced the attractiveness of the South Korean stock market for five years or so in that a large amount of dividends can be an effective way of holding global investors in a flat stock market short of liquidity. “When South Korea was a typical emerging economy, exchange gains and capital gains based on substantial exchange rate fluctuations used to be capable of more than offsetting passive dividend payment,” Hyundai Securities explained, adding, “Now, however, global investors are reluctant to put their money in the South Korean stock market with its dividend payment remaining small and the exchange gains having disappeared.”

Stock market experts point out that companies need to become friendlier to shareholders, rather than piling up reserves, for an increase in dividend payment. They also mention that the government should encourage the payment of dividends as well. “The government needs to be consistent in policy and maintain the current tax reduction on divided income,” said IBK Investment & Securities.

 

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