Azernews.Az

By Bloomberg

South Korea is poised for the fastest dividend growth in Asia as more companies follow Samsung Electronics Co.’s example of higher payouts and the government urges businesses to make better use of their cash hoards.

Dividends in the benchmark Kospi index will probably rise 35 percent during the next 12 months, versus an average projected increase of 12 percent for 16 Asian markets tracked by Bloomberg. Samsung’s announcement of a 41 percent payout boost on Thursday follows higher dividends at Korean companies from Hyundai Motor Co. to LG Electronics Inc. this month.

The move by Samsung, Korea’s biggest listed company, will probably encourage Kospi index firms to return more of their $189 billion in cash to shareholders, according to Shinyoung Investment Management Co. and NH-CA Asset Management Co. The government has introduced a tax penalty on companies with high cash reserves to encourage more capital investment, higher wages and bigger dividends from Asia’s second-lowest yielding stock market.

“We have to be more aggressive on dividend-oriented investment from this year,” Huh Nam Kwon, the chief investment officer at Shinyoung Investment in Seoul, which oversees about $12 billion. “I plan to look into more holding companies and big companies with low payout tendency.”

Samsung Payout

Samsung will pay a dividend of 19,500 won a share, up from 13,800 won a year earlier, after posting fourth-quarter profit on Thursday that beat analysts’ estimates on demand for memory chips. The world’s biggest smartphone maker has an indicated dividend yield of about 1.5 percent, according to data compiled by Bloomberg.

“It is meaningful in that they actually took action, kept their promise and we confirmed the company’s will today,” said Kim Taewoon, head of equity at NH-CA Asset Management, which oversees $17 billion. “Samsung is the leading company of South Korea, so the ramification would be big.”

The Kospi index has a projected yield of 1.6 percent, versus an average rate of 3.2 percent in Asia and 3 percent for the MSCI Emerging Markets Index. Korea’s equity gauge has climbed 1.8 percent this year, compared with 2.1 percent gain in the developing-nation measure’s increase.

Samsung Electronics dropped 1.3 percent at the close, while the Kospi slid 0.5 percent.

“They may not be able to catch up the global payout level in the short term, but I do believe it will definitely trend up,” said Song Seong Yeob, head of equity at KB Asset Management Co., which oversees $36 billion. “Once you increase the payout tendency, there’s no way to reverse it. So, it’s positive to the overall market.”