[Retail Investor Lab] 2.25 Trillion Won Flows Into High-Dividend ETFs as New Products Diversify Investor Options

If you're curious about where money is flowing these days, new products can provide hints. Among the exchange-traded funds (ETFs) debuting on the stock market this month, those emphasizing dividends are particularly noticeable. President Lee Jae-myung's successive remarks have fueled this trend. The market is embracing dividend expansion as a "new formula."

According to IBK Investment & Securities on the 21st, 2.25 trillion Korean won flowed into domestic high-dividend ETFs this year. Domestic high-dividend ETFs are products that invest in high-quality stocks with high dividend payouts. They aim for returns more than double the interest rate of one-year term deposits at commercial banks. They are convenient as they can be bought and sold anytime like stocks and allow diversified investment across multiple stocks with a single purchase.

Kim In-sik, a researcher at IBK Investment & Securities, analyzed, "Investor interest is growing as the new government's strengthened shareholder return policy and the introduction of separate taxation on dividend income, which was included in the tax law revision bill, are becoming more visible."

As demand increases and the market expands, the types of domestic high-dividend ETFs are also diversifying. Recently launched products not only offer monthly dividends but also incorporate various features to attract investors.

✅ Focused Investment in Companies Repurchasing and Retiring Treasury Stocks

This year, the domestic stock market saw the first high-dividend stock ETF surpassing 1 trillion Korean won in net assets. The standout is Hanwha Asset Management's 'PLUS High-Dividend Stock ETF'. Though launched 13 years ago, it is experiencing its peak performance this year.

After exceeding 1 trillion Korean won in net assets in June, it has now grown to 1.624 trillion. Its one-year return rate is approximately 37%, and it pays out 78 Korean won in dividends monthly, resulting in an annual dividend yield of around 4%. Top holdings include Woori Financial Holdings, Industrial Bank of Korea, DB Insurance, Kia, and Hyundai Motor. Stocks are replaced twice a year, in June and December.

On the 16th, the 'PLUS Treasury Stock Repurchase High-Dividend Stock ETF' also newly listed. While structurally similar to existing high-dividend stock ETFs, it includes companies actively returning value to shareholders through treasury stock repurchases and retirements. The strategy targets the potential for reduced circulating shares, higher earnings per share (EPS), and stock price appreciation.

On its first day of listing, individual investors net-purchased 32.6 billion Korean won worth. Major holdings include Korea Zinc, Mitsui & Co., Woori Financial Holdings, Shinhan Financial Group, and Hyundai Motor, with stock changes occurring twice annually (June and December).

✅ Hunting for Alpha with U.S. Growth Stocks

Kiwoom Investment Asset Management's 'KIWOOM Korea High-Dividend & U.S. AI Tech' ETF, listed on the 2nd, addresses the weakness of low growth potential in Korean dividend stocks. It is a hybrid ETF holding 70% domestic high-dividend stocks and pairing them with high-growth U.S. AI tech stocks.

Domestic high-dividend stocks include Korean Re, LG Uplus, Industrial Bank of Korea, NH Investment & Securities, and Cheil Worldwide -- all with consistent dividend payouts for over five years. The average dividend yield is 3.6% annually, and the total return over the past five years is 20.1%, outperforming the U.S. S&P 500's 16.6% during the same period.

Kiwoom Asset Management explained, "Even if an economic crisis occurs in Korea, dollar-denominated assets can contribute to defending returns through exchange rate effects. Additionally, losses from domestic investments can be offset by gains from overseas investments when taxed collectively, reducing the tax burden."

✅ Targeting an Annual Dividend Yield of 6%

Shinhan Asset Management's 'SOL Korea High-Dividend' ETF, set to list on the 23rd, aligns with the new government's dividend reinforcement policy. It includes 20 domestic stocks with high expected dividend yields and 10 companies implementing capital reserve dividends, forming a portfolio of 30 stocks.

Capital reserve dividends are a system where companies distribute dividends using capital reserves instead of profits, offering tax benefits. From an investor's perspective, this can lead to higher dividend payouts.

Top holdings include Woori Financial Holdings, Hana Financial Holdings, Kia, Hyundai Motor, and Shinhan Financial Group. Shinhan Asset Management expects 76% of the portfolio to benefit from separate taxation on dividend income, with 22% allocated to capital reserve dividend companies like Korea Financial Holdings and Hyundai Elevator. The reduced tax burden is projected to result in a real dividend yield of around 6% annually. The total expense ratio is 0.15% annually, lower than competitors' 0.2%.

Lee Jae-myung's Dividend Push Drives ETF Surge