Foreign investors earn 5.7 tril. won dividend

By Yoon Ja-young

Foreign investors in Seoul stocks will get over 5.7 trillion won ($4.6 billion) in dividends for 2015. The government has been encouraging businesses to expand dividends on expectations that the money will flow into households, but the policy doesn’t seem to be of much benefit to individual investors.

FnGuide, a financial market information provider, released a report Tuesday after analyzing corporate filings of 748 companies regarding payout plans. These companies, which close their books in December, are scheduled to pay a combined 15.8 trillion won in dividends from their earnings last year.

Among them, foreigners will get 5.7 trillion won, or 36.4 percent of the total. On the main KOSPI bourse, the payout totaled 14.9 trillion won. Foreign investors will get 37.9 percent of the dividends, which is higher than their market cap of 32.2 percent. In the junior, tech-heavy Kosdaq market, meanwhile, 11.2 percent of the 883.5 billion won in dividends will head to foreign investors. They hold 9.9 percent of the market cap.

They are getting more dividends compared with their market cap, thanks to their investment pattern in which companies with high dividend payout ratios are preferred.

However, the data is triggering questions about the government’s policy regarding dividends. It has been inducing businesses to expand payouts, including giving tax benefits, in expectations that the money will flow into the household sector to boost consumption and spur growth.

Moon Jung-hiu, an economist at KB Investment and Securities, said, “It is doubtful whether the payouts will notably increase household income,” pointing out that individual investors have only small stakes in conglomerates.

Samsung Electronics is scheduled to pay 1.6 trillion won in dividends to foreign shareholders, who hold 49.5 percent stake in the company. Shinhan Financial, where foreigners hold 65.6 percent of the stock, followed in the dividends list, paying foreign investors 376 billion won.

Hyundai Motor, SK Telecom, KB Financial, POSCO, and KT&G are also paying over 200 billion won each to foreign shareholders.

Increasing dividends may not be a cure-all. “Dividends are paid from corporate earnings, which are also used for facility investment and paying back loans,” said Lee Han-deuk, a senior researcher at LG Economic Research Institute, in a report.

He added that using corporate earnings for profitable investment opportunities instead of paying out dividends may be better for shareholder value as well since they can gain from rising share prices instead of dividends.

Still, most analysts agree that Korea’s dividend payout ratio is still low compared with other economies. It stands at around 20 percent, which is 20 percentage points lower than other Asian countries.