Focus on Dividends
Twenty-eight foreign companies with more than 1 trillion won in sales revenues have paid 80 percent of their net incomes as dividends for the last three years.
For the last three years, these companies have earned 12.6 trillion won (US$12.4 billion) in revenue and paid 10.09 trillion won (US$9.9 billion) as dividends. During the same period of time, investment in facilities in Korea was 8.8 trillion won (US$8.8 billion), which is 1.3 trillion won (US$1.28 billion) lower than the total amount of dividends. The number of employees also dropped by 4 percent, which shows that contributions to employment even shrank.
CEO Score, a corporate performance evaluation site, looks into the performance, employment, investment, and dividend payout ratio of 28 foreign investment companies. According to their research, these companies earned 302.5 trillion won (US$297.9 billion) in revenues and 12.6 trillion won (US$12.4 billion) of net income for the last three years. This means that the profit ratio is 4.2 percent.
These companies scored an 80.3 percent accumulated dividend payout ratio by paying 10.089 trillion won (US$9.9 billion) as dividends for the last three years. Even though net income decreased by 2 trillion won, from 5.3 trillion won (US$5.2 billion) in 2011 to 3.3 trillion won (US$3.2 billion) in 2013, the amount of dividends paid out increased over 1 trillion won from 3.3 trillion won (US$3.2 million) to 4.35 trillion won (US$4.28 billion).
In fact, these companies showed a 131 percent dividend payout ratio last year, as the amount they paid out as dividends is over 1 trillion won greater than net income. This is almost five times greater than the dividend payout ratio, 26.7 percent, of the ten largest groups in Korea in 2013. This trend subjects foreign companies to constant criticism over “squeezing the orange” and “draining national wealth.”
GM Korea recorded the highest dividend payout ratio of 274.5 percent relative to accumulated net income for the last three years. The accumulated net income of GM Korea for the last three years was only 120 billion won (US$118 million) due to its 100 billion won (US$98.5 million) loss in 2012, but the total amount of dividends paid was 200 billion won (US$196 million). Although GM Korea did not pay out dividends last year, the dividend payout ratio was 136 percent in 2011, with a total amount paid of 170 billion won (US$167.4 million).
Sony Korea has not paid dividends since 2006, but the dividend payout ratio reached 1,255 percent last year, which made Sony Korea jump to second place in terms of accumulated dividend payout ratio with 272.7 percent. Corning Precision Materials, which was separated from Samsung, was number three with the total amount of dividends paid being 6 trillion won (US$5.9 billion), 152.5 percent of its 4.45 trillion won (US$4.38 billion) net income.
BASF Korea (90.9 percent), Kdac (89.2 percent), Novelis Korea (86.1 percent), and IBM Korea (80.4 percent) followed to record more than 80 percent of the dividend payout ratio. In addition, Standard Chartered Bank Korea (67.4 percent), Dongwoo Fine-chem (61.1 percent) and 3M Korea stayed in the top 10, with more than 50 percent of the dividend payout ratio.
On the other hand, Home Plus Korea, Costco Wholesale Korea, Home Plus Tesco, Audi Volkswagen Korea, BMW Korea, and Nomura Financial Investment did not pay out dividends during the research period.
The number of employees in foreign companies with over 1 trillion won of sales revenues decreased from 87,018 in 2011 to 84,646 in 2012, and again to 83,645 in 2012. The rate of decrease was 3.9 percent for three years. But during the same period, the number of employees in the ten largest groups increased by 36.9 percent from 849,019 to 910,221.
The increase in employment was greatest in BMW Korea, a 77.2 percent growth from 79 in 2011 to 140 at the end of last year. Mercedes Benz Korea (33.7 percent), Hitachi-LG Data Storage Korea (27.5 percent), Costco Wholesale Korea (14.5 percent), Lina Life Insurance (11.2 percent), and BASF Korea (9.8 percent) followed.
Investment, just like employment, dropped 18.8 percent from 3.62 trillion won (US$3.566 billion) in 2011 to 2.94 trillion won (US$2.90 billion) in 2012, and another 23.1 percent to 2.26 trillion won (US$2.22 billion) in 2013. The rate of decrease was 37.6 percent for three years.