NPS to request retail giants increase dividend

Health and Welfare Minister Park Neung-hoo speaks during a meeting of the National Pension Service's fund management committee at a hotel in Jung-gu, Seoul, on Dec. 27, 2019. / Yonhap

By Kim Jae-heun

Local retailers are becoming nervous prior to their general shareholders meetings scheduled for the end of this month.

The new coronavirus outbreak struck almost every business sector in the country hard and the “big three” retail giants were no exception.

Lotte Shopping, E-Mart and Hyundai Department Store saw their net profits halved over the last two months; however, their biggest stakeholder ― the National Pension Service (NPS) ― is pushing them to increase dividends.

Their shareholders meetings are scheduled for the fourth week of March ― Hyundai Department Store and Lotte Shopping will hold theirs on the 25th and 27th, respectively.

At the end of last year, the NPS introduced its own set of guidelines, as an “active shareholder,” compiled by a fund management committee led by Health and Welfare Minister Park Neung-hoo. These changed its investment purpose from “simple” to “standard.”

With “standard investment” status the NPS can exercise its influence on listed companies here, pushing them to increase dividends and improve their corporate governance systems. The NPS owns over 5 percent blocks of shares in 56 listed companies ― the fund holds 6.1 percent, 12.74 percent and 12.49 percent shares in Lotte Shopping, E-Mart and Hyundai Department Store, respectively.

Investors in state-owned companies particularly are seeking more dividends as they have long complained about their low-yield investment returns. And, despite growing business uncertainties, leading retailers here have been boosting shareholder value either by paying more in dividends or repurchasing their own stock.

In 2019, Hyundai Department Store's net profit fell by 15.2 percent but it increased its dividend payout from 900 won per share to 1,000 won. E-Mart also saw a 20 percent decline in its net profit last year but maintained its dividend at 2,000 won. Lotte Shopping, which reported 850 billion won in losses paid out 3,800 won per share for a total of 107.4 billion won.

While the NPS has encouraged state-owned firms and local retailers to pay more to their investors, the latter have been shutting down their stores here in response to the coronavirus outbreak, which will weigh heavily on the already-stressed retail industry.

Retailers are being asked to secure “cash” as the worst has yet to come. For department stores, a plunge in the number of Chinese tourists has harshly affected their business, making it harder to increase dividend payouts.

“It's hard to lower the dividend payout despite the worsening financial soundness as the NPS keeps requesting the retailers to pay more,” an official at a local retail firm said.