Investors Turn to Dividend Stocks as Theme Stocks Lose Appeal
As volatility continues to plague theme stocks, more and more investors are gravitating towards dividend stocks. Experts argue that now is the opportune time to invest in these stocks, as historical data indicates higher dividend yields in September compared to the market rate of return.
According to the Korea Exchange, individual investors purchased a net worth of Macquarie Infra stocks totaling 59.4 billion won last month, more than three times the amount in July. Macquarie Infra is renowned for its high dividend yield of approximately 6%, paying out dividends every six months from earnings derived from infrastructure assets such as toll roads, bridges, and energy companies.
In contrast to the 2.9% drop in the KOSPI during the same period, the KOSPI 50 High Dividend Index witnessed a rise of 2.22% last month. Comprised of the top 50 KOSPI-listed companies with the highest dividend yields, this index is gaining traction among investors. Additionally, industries such as securities, telecommunications, and banking, which are characterized by high dividend payouts, have also outperformed the market recently.
Market analysts attribute this shift to increased stock market volatility and the allure of defensive dividend stocks. Concerns surrounding the global economic downturn and monetary policy have generated uncertainties within the stock market. Consequently, prominent stocks in sectors like superconductors have lost their appeal, prompting investors fatigued by prolonged exposure to theme stocks to seek refuge in dividend stocks.
Furthermore, September is viewed as an opportune time for investing in dividend stocks due to their seasonal nature. Lee Eun-taek, a researcher at KB Securities, suggests that dividend stocks consistently generate solid returns in April, September, and December. Drawing from the past 10 years’ data (2013-2022), KB Securities reveals that the average yield of the KOSPI 200 high dividend index in September surpassed the KOSPI by 12.4 percentage points. “Investors looking to maximize their dividend yield are particularly interested in dividend stocks,” explains Lee Eun-taek, emphasizing the importance of focusing on these stocks.
Pension funds are also eyeing dividend stocks, with plans to start buying from September, aligning with year-end share prices and dividend income. Already, pension funds have invested in KT net, SK Telecom, KB Financial Group, and Shinhan Financial Group.
While dividend stocks present an attractive investment opportunity, caution is advised. Financial stocks, in particular, face various risks including heightened interest rate volatility and potential deterioration in government regulations. Researcher Lee from KB Securities highlights stocks such as E1, HD Hyundai, LX International, iMarket Korea, TKG Huchems, Lotte Fine Chemical, Cheil Worldwide, Innocean, Kangwon Land, and GKL as worthwhile investments. These stocks have demonstrated stable net profits until the second quarter and have a favorable track record of maintaining dividends.
As investors seek reliable performance and shareholder returns, the appeal of dividend stocks remains strong amidst the current market landscape.
By Jin Young-gi, Reporter at Hankyung.com
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Input2023.09.02 08:00 Edit2023.09.02 15:56
“I’m tired of following the theme”… Ants Turn to Dividend Stocks
KOSPIGO 50 Dividend Index, up 2%… KOSPI 2.9% ↓
“More stock market volatility… Higher returns on defensive stocks”“Dividend stocks, high yields in April, September and December…Pension funds also pay attention to dividends”
“We need to focus on companies that have achieved a net profit.”
Photo = Getty Image Bank As volatility increases mainly in theme stocks, more and more investors are paying attention to dividend stocks. Experts explained that now is the right time to invest because, in the past, dividend yields in September were higher than the market rate of return.
According to the Korea Exchange on the 2nd, individual investors bought a net worth of Macquarie Infra stocks worth 59.4 billion won last month. It is more than three times more than July (19 billion won). Macquarie Infra is a high representative dividend stock with an annual dividend yield of around 6%. Macquarie Infrastructure pays dividends to shareholders every six months from earnings from investments in infrastructure assets such as toll roads and bridges in Korea and energy companies. The first half dividend was paid last month. The KOSPI 50 High Dividend Index rose 2.22% last month. This is in contrast to the 2.9% drop in the KOSPI over the same period. The KOSPI 50 High Dividend Index consists of 50 stocks with the highest dividend yields among KOSPI listed companies. In addition, the securities, telecommunications and banking indices, which are classified as high dividend industries at the end of the year, also outperformed the market.
Experts explained that stock market volatility has increased and yields from dividend stocks with defensive features are high. The recent global economic downturn and concerns about monetary policy have increased uncertainty in the stock market. Analysts say that because of this, leading stocks in the stock market have disappeared, and investors who felt tired as the market for theme stocks, such as superconductors, continued for a long time, flowed into dividend stocks.
The stock market explained that September is the right time to invest given the seasonal nature of dividend stocks. Lee Eun-taek, a researcher at KB Securities, explained, “Dividend stocks tend to record good returns in April, September and December every year.” According to this brokerage firm, the average yield (annual rate) of the KOSPI 200 high dividend index in September over the past 10 years (2013-2022) was 12.4 percentage points higher than the KOSPI. Lee Eun-taek, a researcher, said, “After the first half of the year, the outline of dividend income will be established around September,” and “Investors who want to increase the dividend yield are mainly interested in dividend stocks.” ‘Focusing on this dividend stock is also considered positive. Lee Jae-seon, a researcher at Hyundai Motor Securities, said, “Given the year-end share price and dividend income at the same time, pension funds will start buying dividend stocks from September.” Pension funds have already bought KT net (50.3 billion won), SK Telecom (49.3 billion won), KB Financial Group (42.9 billion won), and Shinhan Financial Group (25.4 billion won win) last month.
However, even within dividend stocks, there are voices that the jade needs to be covered. “Financial stocks are exposed to various risks, such as increased interest rate volatility and deterioration in government regulations and indicators,” said Lee. KB Securities selected E1, HD Hyundai, LX International, iMarket Korea, TKG Huchems, Lotte Fine Chemical, Cheil Worldwide, Innocean, Kangwon Land, and GKL as stocks of great interest. This is because it has secured a stable net profit until the second quarter and there is little history of reducing dividends in the past. Researcher Lee explained, “These stocks are sensitive to the economy, so they have investment appeal in terms of performance and shareholder returns.”
Jin Young-gi, Hankyung.com reporter young71@hankyung.com
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