Analysts said that for shareholder returns to become a powerful driver of stock price gains in Korea's stock market, building long-term trust is essential rather than one-off return amounts.
Kim Min-gyu, a researcher at KB Securities, said in a report on the 1st that "shareholder returns are the best card that can steadily and strongly lift stock prices for a long time," but noted that "it becomes a driver for stock gains only when trust is proven over time and with numbers that shareholders are prioritized not only when times are good but also when they are bad."
KB Securities pointed to Apple and TSMC, global bellwethers, as best-practice cases of shareholder returns. After halting dividends in 1996 and building up cash, Apple resumed dividends and share buybacks after CEO Tim Cook took office in 2012.
At the time, growth in the smartphone market was slowing and the share price had fallen by about 40%, raising performance concerns, but Apple announced a large share buyback of $60 billion (about 80 trillion won) in 2013. Despite guidance being revised downward, the large shareholder return announcement set the stage for a rebound in the stock.
Kim said the same point can be seen in index performance in the U.S. market. Over the long term, corporations that have steadily reduced their actual shares outstanding through cancellations of treasury stock (S&P 500 Buyback Aristocrats) outperformed those that simply had large buyback amounts. In dividends as well, "dividend growth" stocks (S&P 500 Dividend Aristocrats) that have steadily increased dividends, rather than those with high short-term dividend yields, showed lower volatility and superior performance.
Taiwan's TSMC is a representative case of building trust through dividends. In 2019, TSMC formalized a policy that it "will return 70% of free cash flow (FCF) as quarterly dividends and will not reduce the dividend per share (DPS)." It kept that promise by not cutting DPS even when profit fell during semiconductor downcycles in 2019 and 2023.
Kim explained, "TSMC's valuation re-rating was not because the upside opened in a boom, but because it proved the downside was protected in a downturn," adding, "Shareholder returns likewise require a process of proving promises with numbers when conditions are unfavorable."
In the domestic market, corporations that are building shareholder trust through ongoing cancellations of treasury stock or DPS increases are drawing attention. According to KB Securities, representative corporations that have conducted share cancellations for shareholder returns for at least two of the past three years include Mirae Asset Securities(006800), Shinhan Financial Group, KT&G, Woori Financial Group, Hana Financial Group, Kia, Hyundai Motor, Meritz Financial Group, and SK Square.
In a high-rate environment, the value of "dividend growth" stocks that have maintained or increased dividends without cuts is also coming to the fore, rather than stocks with only high short-term dividend yields. Representative names that have not reduced DPS for more than 10 years include Dongsuh(026960), SK Gas, KT&G, OTOKI, LG, Hyundai Department Store, Nongshim, LS, Yuhan, Hyundai Glovis, POSCO International, Samsung Card, Jeil Jedang, Hyundai Engineering & Construction, Hankook Tire & Technology, Hanwha, GS Holdings, KT, Samyang Foods, and Hanwha Aerospace.
Kim said, "Rather than simply increasing the size of one-off returns, building trust that shareholder returns will be steadily expanded will be a key driver of stock prices in the Korean market."