The total dividend payment by listed companies in South Korea for 2018 will likely exceed 30 trillion won ($26.6 billion) for the first time amid growing demand from institutional investors to up their dividends that have been historically lower than those of global peers.

According to Seoul-based financial data provider FnGuide on Sunday, the total cash dividends of 499 Kospi- and Kosdaq-listed firms that have disclosed figures for 2018 business year has reached 26.27 trillion won as of Sunday, up 25.9 percent from their 20.86 trillion won in the previous year. The figure has also already exceeded the total dividend payment by all listed companies for 2017 that stood at 25.5 trillion won.

Local brokerage houses expected that the total dividend payment by the country’s all listed companies for 2018 would top a combined 30 trillion won, which is the highest-ever dividend payouts in total by Korean firms, given that there are still a number of companies that have not announced their dividend payout plans yet.

The dividend payout ratio of 309 Korean firms that have disclosed both their earnings and dividends for 2018 averaged 21.2 percent, up almost 5 percentage points from 16.4 percent in the previous year.

Such an improvement in the dividend payout ratio, which refers to the ratio of cash returns relative to total net income and measures the share of payout to shareholders, is expected to entice investors’ interest in Korean stocks that have remained less attractive than their global peers due to their historically low dividends.

The upswing comes amid growing demand by institutional investors such as National Pension Service (NPS) to pay more dividends.

Hyundai Green Food Co., for example, which has been on the NPS’s blacklist for paying low dividends, recently announced it will more than doubled its total dividend payment for 2018 to 18.3 billion won from 7 billion won in the previous year. Hanjin Group also said it will raise the dividend payout ratio of Hanjin KAL Corp., the conglomerate’s holding entity, to above 50 percent amid growing pressure from the NPS and private equity fund Korea Corporate Governance Improvement (KCGI), which recently became its second-largest shareholder.

Industry analysts expect that Korean companies would continue to seek to up dividends as more institutional investors will likely enhance stewardship code, a guideline that encourages institutional investors to be more vocal in exercising their shareholder rights, and expanding engagement in management by shareholders to improve corporate value.

By Chung Seung-hwan and Lee Eun-joo

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]