Regarding the settlement of account dividends for the 2024 business year, the so-called 'advance dividends and subsequent investments' corporations have increased. It is expected that the shock to the market due to the dividend ex-date at year-end will also decrease.
'Advance dividends and subsequent investments' refers to setting the dividend record date not at year-end but after the board of directors has confirmed the settlement of account dividends. In simple terms, it means moving the record date for receiving settlement of account dividends from year-end (December 31) to around 2nd to 4th month, just before or after the regular shareholders' meeting.
According to the Financial Supervisory Service's electronic disclosure system (DART) on the 16th, as of the 13th, there were 98 companies listed in the KOSPI market that disclosed advance dividends and subsequent investment plans, excluding preferred stocks. This surpassed the 74 companies from the same period last year. Even on that morning, companies such as Hyundai Construction, Ottogi, Lotte Wellfood, Korean Re, Hansum, and Husteel indicated they would decide the dividend record date later in the board of directors' meeting, suggesting the number of advance dividends and subsequent investment corporations is expected to continue to increase.
Previously, investors had to trade stocks without knowing the size or even the existence of dividends, as the record date was set before the board of directors. With the change to advance dividends and subsequent investments, investors can evaluate the dividend status, size, and dividend yield (dividend per share ÷ stock price) before purchasing stocks.
Since last year, financial authorities have been encouraging improvements in dividend procedures to avoid so-called 'blind dividends,' prompting corporations to amend their bylaws accordingly. During the settlement of account dividends for the 2023 business year, financial companies such as banks, securities firms, and insurance companies actively adopted advance dividends and subsequent investments.
This year, manufacturing and service corporations also participated in advance dividends and subsequent investments. HD Hyundai Group is a representative case. They decided to determine the existence and size of dividends through upcoming board meetings and regular shareholders' meetings. HD Hyundai Group amended its bylaws in March 2021 to set the dividend record date not at the end of the accounting period (December 31) but on a date set by the board of directors; however, they have been setting the dividend record date at year-end until now.
In addition, GS Group and LX Group (LX Holdings), as well as firms like Kangwon Land and GKL, also amended their bylaws at the regular shareholders' meeting in March. They decided to set the dividend record date for the 2024 business year's settlement of account dividends during the first quarter board meeting in 2025.
Research findings suggest that as the number of advance dividends and subsequent investment corporations increases, the shock from the year-end ex-date will decrease. According to the Capital Market Research Institute, KOSPI-listed companies that set December 31 as their dividend record date saw their stock prices fall by an average of 0.43% on the ex-date compared to the previous day. In contrast, those that chose non-year-end dates for the dividend record date experienced only a 0.18% decline.
Kang So-hyun, a senior researcher at the Capital Market Research Institute, noted in a report, 'If the number of corporations implementing the improved record date system (advance dividends and subsequent investments) increases, it is expected to alleviate the phenomenon of the record dates concentrating at year-end, thus mitigating the significant drops in stock prices on certain days due to the dividend ex-date.'
However, many companies still set the record date at year-end. Previously, Celltrion decided to distribute 750 won in cash and 0.05 shares as dividends per common share, with the record date set for the upcoming 31st. Considering the time it takes to process payments (2 trading days), investors must purchase Celltrion stock by the 26th to receive dividends.
With a variety of companies that set their dividend record dates at year-end, those implementing advance dividends and subsequent investments, and companies that engage in interim dividends, investors can consider strategies that account for timing differences. Companies with substantial dividends could also open possibilities for investments that consider the price difference (spread) between spot and futures.
Nonetheless, since high-dividend stocks generally adopt advance dividends and subsequent investments, there is advice to focus on the months of January and February when the board meets to decide on dividends. Kim Jong-young, a researcher at IBK Investment Securities, said, 'High-dividend stocks in the telecommunications, finance, and automotive sectors have set their dividend record dates for after year-end, making dividends in January and February more appealing,' adding, 'Typically, companies disclose the record date two weeks in advance, so dividend investors should consistently monitor for updates.'