SK hynix(000660) shares fell for two straight days after releasing a quarterly dividends announcement on the 7th. Disappointment selling poured in after the quarterly dividend was kept at 375 won, the same as last year. Under the existing shareholder-return plan, SK hynix plans to pay a total of 1,500 won this year. Even if a special dividend is added later, with the share price now above 1.4 million won, the dividend yield is expected to be only in the 1% range even if the annual dividend increases tenfold from the previous year.
Another SK Group affiliate, SK Telecom(017670), was also hobbled by low dividends. SK Telecom shares surged recently on the tailwind of its data center business, dragging the dividend yield sharply down to the 3% range, which became a burden. Lee Chan-young, an analyst at Eugene Investment & Securities, said, "As the share price rose, the dividend yield fell," and explained, "Foreign investors who invested for high dividends sold shares, widening price swings."
◇ Listed companies' dividend policies not keeping up with rising share prices
Although Korea's stock market rallied to a record high in the first half, powered by the surge of semiconductor stocks riding the AI boom, analysts say the chronic undervaluation remains unresolved due to still-low dividends (shareholder returns).
For share prices to rise steadily, there must be a thick base of long-term investors, but Korea's market has a low payout ratio, so when prices rise, short-term investors dominate by taking profits and leaving. This has led to a vicious cycle of frequent leadership rotation and heightened market volatility.
Since the so-called "auto-chem-refining boom," when shipbuilding, chemicals and refining led the market's rise in the mid-2000s, Korea's market has seen frequent rotations of leading sectors—from bio and secondary batteries to shipbuilding-defense-nuclear power early last year and semiconductors this year. Each time, the index jumped briefly and then repeated a cycle of returning to previous levels.
A head of a mid-sized securities firm said, "What matters more than a short-term spike in share prices is drawing a long-term uptrend, which is only possible when growth potential stands out on the firm footing of a thick base of long-term investors," adding, "It's a structure hard to expect in our stocks with low dividend levels."
It does not mean Korea lacks growth industries or that corporate competitiveness is weak; rather, because a virtuous cycle—where rising corporate profits directly lead to higher dividends—has not taken hold, a regressive pattern is repeating in which profit-taking hits after prices rise and funds move to new leaders.
Former leaders—shipbuilding, defense and nuclear power stocks—which led before semiconductors, also saw dividend yields fall after big price gains. In the case of Hanwha Aerospace(012450), it paid 7,000 won per share last year, and its dividend yield based on the share price at the time was only 0.7%. The dividend yields of HD Korea Shipbuilding & Offshore Engineering(009540), a leading stock in shipbuilding, and Korea Electric Power Corporation are also around 3% each.
Overseas rivals, by contrast, have been steadily supporting share prices with large-scale shareholder-return policies. A prime example is U.S. Micron, which competes with Samsung Electronics and SK hynix.
Micron, when it announced results for the third quarter of fiscal 2026 in June, officially said it would expand shareholder returns starting Dec. 9 this year and return 100% of excess cash to shareholders. Compared with domestic listed companies that typically announce less concrete plans to expand shareholder returns over three to five years, Micron's shareholder-return plan was specific and immediate.
◇ The key to reclaiming semiconductor leadership: "drastic dividend increases"
After a sharp correction from the "AI peak" narrative, a bold shareholder-return plan from Samsung Electronics and SK hynix is cited as a key condition for semiconductor stocks to regain market leadership.
Kim Dong-Won, head of research at KB証券, said, "The size of Samsung Electronics' shareholder returns to be announced soon is estimated at a minimum of 100 trillion won and up to 200 trillion won, more than 10 times larger than the existing shareholder-return size (980 billion won)," adding, "A large-scale shareholder-return policy will be the starting gun for a re-rating."
Strengthening shareholder returns through aggressive dividends is urgent, but the government's policy is seen as unfinished.
Last year, a tax law revision passed to apply up to a 30% separate tax on dividend income from high-dividend corporations. However, critics said it was a step back, given that a top rate of 25% had been discussed by the market and the National Assembly.
The ISA (individual savings account) policy, which was supposed to draw long-term investment from retail investors, also fueled distrust with flip-flopping moves.
Although raising the ISA tax-exempt cap and introducing a domestic-investment ISA were floated to encourage long-term investment, the government instead limited the contract period for general ISAs to an initial three years and a maximum of five years in this year's tax reform plan. With profits and losses settled every five years, the compounding effect from tax-savings reinvestment disappears. In response, President Lee Jae-myung on the 7th ordered a full review of the ISA overhaul plan.