There is a saying, "When the cold wind blows, light dividends stocks." Because the dividends season comes at year-end, investors' attention turns to dividends stocks.
This year's dividends season is expected to require more focus in picking names. As separate taxation on dividends income is being implemented, some advise that investors need to identify which names it applies to.
Kim Jong-yeong of NH Investment & Securities said, "Although the record date for dividends is year-end, the size of the dividends is finalized afterward, so investors seeking dividends income should approach target corporations at year-end by considering the corporations' net profit, payout ratio, and past dividends policy."
As for corporations eligible for separate taxation on dividends income, first are "corporations whose dividends do not decrease compared with the previous fiscal year." If the payout ratio is 40% or higher, they become "dividends excellence-type" corporations, and if the payout ratio is 25% or higher and the dividends increase 10% from a year earlier, they become "dividends effort-type" corporations.
Because eligibility for separate taxation is determined by the "payout ratio," there is advice to watch corporations that ▲ consistently keep a payout ratio of 40% or higher and ▲ have low earnings volatility. Kim said, "The payout ratio changes more with fluctuations in net profit than with dividends," adding, "Accordingly, it is reasonable to see a higher likelihood of separate taxation applying to corporations that consistently maintain a payout ratio of 40% or higher and have low earnings volatility."
What corporations does the securities industry expect to be subject to separate taxation on dividends income this year? NH Investment & Securities cited Samsung Life Insurance, Cheil Worldwide, KEPCO KPS, KEPCO E&C, HiteJinro, and S-1 as corporations with a high likelihood of separate taxation at this point.
Kim explained, "We judge that these corporations have a high likelihood of separate taxation because their dividends frameworks have been stable in the past and their payout ratios have remained relatively high."
Some names may raise their payout ratios. If they meet the conditions of a payout ratio of 25% or higher and a 10% increase in cash dividends from a year earlier, they are included as "dividends effort-type names."
Kim explained, "To meet the payout ratio, some corporations may increase dividends, or if an increase is difficult, they may appear to meet the separate taxation requirements for dividends income by excessively recognizing fourth-quarter expense."
There are also expectations that large amounts of funds will start to flow in earnest into the stock market in Feb.–Mar. next year, aiming for separate taxation. Most corporations finalize the settlement of account dividends and the record date during this period, and by convention often disclose dividends in advance. This would make it easier for investors to judge early whether separate taxation applies.
Meanwhile, the timing of buying dividends stocks should also be considered. Separate taxation on dividends income applies to payments made on or after Jan. 1, 2026, by December-closing corporations. If a corporation meets the separate taxation requirements, investors who are net buyers of that corporation's shares by Dec. 26 this year and are listed on the shareholder register as of the end-December record date can receive the benefit of separate taxation on dividends paid next year.
Corporations with Dec. 31 this year as the record date for dividends are also subject to separate taxation because the dividends are paid in 2026. However, whether the actual separate taxation requirements are met is expected to be finalized after the shareholders meeting.
NH Investment & Securities said the detailed schedule proceeds as "set the record date for dividends → provisional disclosure of dividends → finalize dividends at the shareholders meeting → disclose whether the corporation is subject to separate taxation → pay dividends to shareholders holding on the record date."