When will the settlement of account dividends be decided?” (Hansem shareholder)
I thought it had dropped a lot considering the dividends drop, and I bought in, but it turns out it wasn't the dividends drop date, which is rather fortunate.” (YESCO Holdings shareholder)
The number of listed corporations delaying the settlement of account dividend record date after the board of directors meeting to avoid ‘blind spot dividends,’ where investors are unaware of dividends or the scale of dividends, has increased. These are so-called 'pre-dividend decision, post-investment' corporations.
Pre-dividend decision and post-investment simply means moving the record date for receiving settlement of account dividends from the year-end (December 31) to around February to April, before or after the regular shareholder meeting. This is aimed at having investors hold shares until the record date (any day in February to April) while already being aware of the dividend status, which financial authorities are encouraging.
However, many investors seem to have misunderstood the settlement of account dividend record date at the end of last year. Since the record date for settlement of account dividends has been at the end of the year, many investors traded stocks based on that understanding. There are also opinions stating that it is confusing as each corporation has different record dates, and oftentimes those dates are only revealed after the board meeting.
According to the Financial Supervisory Service’s electronic disclosure system (DART) on the 3rd, Hansem announced on the 30th of last month the 'guidance on the record date for dividends due to amendment of articles of incorporation.' It stated that during last March's regular shareholder meeting, the articles of incorporation were revised to change the record date for settlement of account dividends from the end of the accounting period (December 31) to a date determined by the board of directors.
Hansem noted, “The decision on whether to pay the settlement of account dividends will be based on the record date determined by the board of directors later, not on December 31. If shares are not held on the record date, dividends will not be paid.”
However, it appears that investors who mistook Hansem's record date for settlement of account dividends as December 31 have already dumped their shares on the dividends drop date. Before adopting the pre-dividend decision and post-investment approach, the dividends drop date for the December settlement corporations was the 27th of last month, and on that day, Hansem’s stock price fell by 7.81%.
YESCO Holdings has also changed its articles of incorporation to set the record date for dividends, not at the end of the accounting period, but to be determined separately by the board. As the YESCO Holdings board meeting is scheduled for next month, the record date will be set after that. However, YESCO Holdings also did not issue a disclosure to inform that the record date would be decided later, leading to confusion among investors.
Korea Asset In Trust announced on the 26th of last month that it would set the record date for dividends to the end of March, after the regular shareholder meeting. For shareholders who had thought the record date would be December 31 as before, it means that notice was issued only the day before the dividends drop date.
Although many corporations provided advance notice of the record date for dividends, they only stated that it would be resolved at the board meeting instead of specifying an exact date. According to the Korea Exchange, among KOSPI-listed corporations as of the 20th of last month, 278 decided not to set the record date on December 31 but instead to determine it separately at the board meeting, thus not revealing the concrete record date. A total of 393 KOSDAQ-listed corporations also decided to announce the exact record date after board resolution.
Since the record date for dividends is determined by the resolutions of each corporation's board, the record dates vary greatly. Hanatour's settlement of account dividend record date is on the 8th. Considering that it takes two trading days to settle, shares must be held until the 6th. Sollid's record date for settlement of account dividends is on March 31.
With the passage of the revision of the Capital Markets Act by the National Assembly, not only the settlement of account dividend record dates but also quarterly and semi-annual dividend record dates can now occur on dates other than the end of March, June, or September. If corporations amend their related articles of incorporation, they can determine the amount of dividends at the board meeting held within 45 days after the end of each quarter, and the record date can be set thereafter. This means that dividend investors need to scrutinize the companies' articles of incorporation and record dates more than before.
However, despite the confusion around the record date for dividends, many securities firms believe that investing in dividend stocks is favorable in the current climate of increased uncertainties domestically and abroad. Park So-yeon from Shin Young Securities Research Institute noted, “Corporations that have changed the record date for dividends to after the board resolution are likely to see heightened expectations for settlement of account dividends moving forward, and it is necessary to possess the wisdom to overcome uncertain times through dividends.”
Kim Yoon-jung from LS Securities Research Institute said, “In an environment of significant market uncertainty, it is effective to select corporations that have consistently expanded dividends for at least five years based on their performance growth.”