Kiwoom Asset Management announced on the 2nd that it will newly list the 'KIWOOM Korean High Dividend & American AI Tech Exchange-Traded Fund (ETF)' that combines domestic high dividend stocks and American artificial intelligence (AI) technology stocks on the securities market.
This product seeks to achieve both the stability of domestic high dividend stocks and the growth potential of American AI tech stocks. It is a second-generation dividend growth ETF newly introduced by Kiwoom, characterized by providing structural dividend growth and tax-saving effects. Additionally, it is a monthly dividend ETF that distributes earnings based on the end of each month.
The KIWOOM Korean High Dividend & American AI Tech ETF invests by combining the domestic high dividend stock TOP 15 index (70%) and the American AI tech TOP 10 index (30%) at a fixed ratio.
The domestic high dividend index is composed of the top 15 companies that have paid dividends consistently for five years and have been profitable for two consecutive years, selected based on high market dividend rates. A market dividend rate-weighted method is applied to provide stable cash flow.
The American AI tech index selects American technology stocks with high AI relevance through natural language and keyword analysis, and then focuses investments on the top 10 global technology stocks (such as Nvidia, Microsoft, Alphabet, etc.) by applying a floating market capitalization weighted method, aiming to capture high growth potential.
The strategy of combining the two indices involves rebalance at a 7:3 ratio every month, utilizing the gains from American AI tech stocks to purchase domestic high dividend stocks, thereby implementing 'structural dividend growth' that expands the scale of dividends. This represents a new form that overcomes the limitations of existing dividend growth ETFs, which depend on corporate management performance and dividend policies.
Kiwoom Asset Management also explained that investing together in the ETF is more advantageous in terms of taxes compared to investing separately in domestic dividend stocks and American tech stocks. This is due to the unique tax structure of ETFs, which applies a taxation method based on the holding period and imposes taxes on the smaller value of the difference between the market value at the time of purchase and sale (market value increment) or the trading profit.
For example, within the ETF, if profits arise from American tech stocks while losses occur from domestic dividend stocks, the two outcomes offset each other, leading to taxation only on the actual remaining profit. Furthermore, if there is a loss in American tech stocks, even if the dividends from domestic dividend stocks are reflected in the market value, they are excluded from taxation as they offset against the losses. This means that investors can enjoy the benefits of loss offsetting even in general accounts, which presents advantages in terms of tax savings.
Particularly when utilized in an Individual Savings Account (ISA), the advantages are maximized. Recently, investors have increasingly chosen domestic high dividend stock ETFs over American high dividend stock ETFs due to issues with foreign tax credits; however, domestic stock ETFs have the limitation of being excluded from loss offsetting for the ISA account when losses occur. In contrast, this product includes American stocks and is classified as a taxable ETF, allowing losses to be offset against other revenues in the ISA account. Thus, it is especially advantageous for ISA investors in terms of tax efficiency.
A Kiwoom Asset Management official noted, "Through this product, investors can simultaneously resolve three concerns: dividends, growth, and tax savings," adding, "especially with the monthly dividend structure and the applicable loss offsetting effect in general accounts, we expect it to be an optimal choice for investors seeking long-term compound effects.
He added, "When utilized in an ISA account, the loss offsetting effect is further amplified, enhancing tax efficiency and minimizing foreign tax credit issues, making it an effective way to address recent tax changes."