By Kang Seung-woo
Foreign-owned firms paid out large dividends last year, nearly more than double the average of all companies listed on the country's main stock market, a local fund market research institution said Sunday.
Critics say that the penchant for high dividends might sap growth potential, given that companies paying them are averse to aggressive investments.
According to an analysis of companies closing their books in December by FnGuide, the dividend payout ratio of foreign-owned firms stood at 29.5 percent in 2010, compared to a 16.25 percent average.
The dividend payout ratio is the percentage of earnings paid to shareholders in dividends ― the higher the number, the larger the dividends given to shareholders.
As of the end of December, there were 17 listed companies whose largest shareholders were foreign and 12 of them surpassed the average dividend payout ratio.
Hankook Shell Oil, the Korean unit of global energy and petroleum heavyweight Royal Dutch Shell, topped the list of high dividend-paying corporations with an 86.24 percent payout ratio.
Korea Exchange Bank (KEB), which hogged headlines for its dividend payout to Lone Star Funds, came in second at 68.51 percent, up 112.75 percent from a year ago, despite only a 14.54 percent increase in net income.
Duckyang Industry, a local automotive interior supplier, KB Financial Group and S-Oil, the nation’s No. 3 oil refiner, rounded out the top five with 52.39 percent, 46.61 percent and 41.29 percent, respectively.
Shinhan Financial, in which BNP Paribas held the biggest 6.35 percent at the time, posted 24.62 percent.
Hana Financial, which saw a change of command from GS-Dejakoo to the state-run National Pension Service in April this year, became the only entity to put up a subpar number with 14.5 percent.
The remaining four companies did not pay out dividends after running into the red.
Dividend payment to overseas investment also grew last year.
According to the Seoul bureau, the listed companies paid out 33 percent more in dividends to foreign shareholders in 2010 than a year earlier, as a total of 4.97 trillion won ($4.7 billion) were paid, compared with 3.73 trillion won the previous year.
They paid out a total of 13.5 trillion won in dividends in 2010, up 25 percent from 2009.
Last year’s dividend payout posted a recovery to the pre-crisis level. Foreign shareholders took home 5.59 trillion won in 2007, but the figure more than halved to 2.62 trillion won in 2008 due mainly to the global financial crisis.
Usually, listed companies pay out a certain dividend of their net earnings, while accumulating the remainder as reserve for future investments.
Investors gunning for capital growth prefer lower dividends, but those who are concerned about companies’ uncertain business portfolios put dividends over growth.
In addition, foreign investors in Korean companies are those focusing on short-term financial investments.
Observers are worried that dividend-sought investments could damage companies’ future growth.
“Companies need to pay appropriate dividends in order not to weaken their growth potential and corporate value. It is appropriate to set aside a certain share of profits as reserves to replenish capital or reduce debts,” said a Seoul-based economist.