Hanwha Asset Management noted on the 7th that even when investing in the ‘PLUS High Dividend’ exchange-traded fund (ETF) that invests in domestic high-dividend stocks through tax-saving accounts such as personal pensions and retirement pensions, investors can still enjoy the tax deferral effect.
According to the Korea Exchange, as of the 5th of this month, the net purchase of the PLUS High Dividend ETF by individuals was approximately 3.9 billion won. The total net worth of the PLUS High Dividend ETF is 483 billion won, making it the largest among ETFs investing in domestic high-dividend stocks.
Hanwha Asset Management explained that the inflow of funds is due to the reduction of tax deferral effects that could have been enjoyed from overseas fund investments through pension accounts and ISAs recently. A restructure of the foreign tax credit system commenced in January of this year, giving rise to concerns over double taxation as taxes were being paid both domestically and abroad.
Assuming one buys a U.S. stock ETF within a pension account and receives 1 million won in dividends, according to the new system, they would first have to pay around 150,000 won in withholding tax in the U.S., and then pay an additional 3 to 5% in pension income tax when receiving their pension.
However, the PLUS High Dividend ETF allows investors to reinvest all dividends received without separate taxation when investing through pension accounts. The yield performance, considering the reinvestment of dividends from the PLUS High Dividend ETF, is 17.4%, 43.5%, and 84.4% over the past 1, 3, and 5 years, respectively.
The PLUS High Dividend ETF pays out distributions at an annualized level of 5 to 6%. The dividend growth rate has reached an average annual rate of 15.4% since its listing in 2012. Hanwha Asset Management has changed the distribution payment frequency from once a year to once a month since May of last year, paying 63 won per share each month.
The portfolio includes Kia, Industrial Bank of Korea, Woori Financial Group, Samsung Securities, DB Insurance, SK Telecom, and Samsung Card. Financial stocks, identified as a representative beneficiary sector for value-up, account for approximately 67%, the highest proportion.
Kim Jeong-seop, head of Hanwha Asset Management's ETF business division, said, “It is important to reassess investment strategies within pension accounts due to recent changes in the investment environment,” adding that “the PLUS High Dividend provides high dividend revenue and can be considered the Korean version of 'SCHD'.”