2024-05-05 05:21:48
The attractiveness of dividends highlighted by the value increase effect
No voting rights, but priority right to dividends
Preferred Stock Index Rises 8.6% This Year
The KOSPI, which was only flat, greatly outperforms
Buy-Low Strategy for Stocks with High Divergence Rates
We must be wary of speculative prostitution due to the low volume of trade
Photo = Yonhap News
Due to expectations of dividend increases due to valuation policy, investments focus on preferred stocks which can generate higher dividend income than primary stocks.
According to the Korean Stock Exchange on the 5th, the KOSPI preferred stock index, which includes 20 preferred stocks listed on the domestic stock market, has increased by 8.66% this year.
During the same period, the KOSPI index increased by only 0.8%. The return on investment of preferred shares far exceeded the market average, which remained stable.
Unlike primary shares (ordinary shares), preferred shares do not have voting rights, but have a priority right to dividends. Therefore, stock prices tend to rise when listed companies implement dividend increase policies or when dividend increases are expected in the future.
This year, the government is accelerating its efforts to increase the value of listed companies through the Corporate Value Up program. As the government encourages the resolution of the Korean discount problem (undervaluation of the Korean stock market) through the voluntary efforts of listed companies, expectations for an increase in dividends are increasing, leading to an improvement in supply and demand for preferred shares.
In the case of NH Investment & Securities, which is actually classified as a high dividend stock, the dividend per share (DPS) of the main stock related to the most recent dividend payment was 800 won, and that of preferred stock was 850. earned. The dividend yield of preferred stocks was 7.3%, 0.5 percentage points higher than that of main stocks (6.8%).
This year, there are many cases where the price rise of preferred stocks is higher than that of primary stocks. For example, the stock price of Hyundai Chow, the preferred investment destination for preferred stock investors, increased by 35.59% during the year.
During the same period, Hyundai Motor’s stock price increased by only 18.43%. The difference between the growth rate of main stocks and common stocks is about two times. The stock prices of Hyundai Motors 2W B and Hyundai Motors 3W B also increased by 35.81% and 34.58%, respectively.
Hyundai Motor Company preferred stocks are also high dividend stocks that are highly recommended by securities companies. The expected dividend yield reaches 7%. As Hyundai Motor Group actively strengthens shareholder returns, steady dividend growth is expected in the future.
Even in the case of Samsung Electronics, which is up 3.69% this year, that compares to its largest shareholder, Samsung Electronics, which is down 1.15%. Samsung Fire & Marine Insurance’s preferred stock price also increased by 24.21%, while its main stock increased by only 14.45%.
In addition, the annual price increase rate of preferred stocks such as Amore Pacific, LG Chemical, Mirae Asset Securities, Samsung SDI, Kumho Petrochemical, Hanwha and CJ CheilJedang was found to be higher than that of major stocks.
Recently, many listed companies have announced shareholder return policies that cancel previously purchased preferred shares. When treasury shares are canceled, the number of shares issued is reduced, earnings per share (EPS) improve, and the stock price increases. Last March, Samsung C&T announced that it would cancel 159,835 shares, or all of its previously acquired preferred shares, and E-Best Investment & Securities announced that it would cancel 5,770,895 shares.
In particular, you can use an investment strategy that seeks capital (dealer) profits by purchasing preferred stocks that have a wide spread between the primary stock and the stock price. In the case of Samsung Electronics, the gap between preferred shares and main shares widened to 27% in November last year, the highest in 10 years.
Subsequently, as Samsung Electronics announced a medium-term dividend policy for 2024 to 2026, the preferred stock prices rebounded and the current gap narrowed to 19%. The analysis is: If preferred stocks with an increasing gap like this are purchased at a low price, profits can be made when the gap with common stocks narrows in the future.
However, preferred stocks generally have low intraday trading volume. Due to the small number of shares outstanding, stock prices sometimes rise and fall despite little influx of buying and selling forces. Since stock price volatility is high, you need to be careful not to let it turn into speculative trading.
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