"Crypto or Not? With Daily Swings of Tens to Hundreds of Thousands of Won, Retail Investors Turn to ETFs [Practical Finance]"

Focus on Stable Cash Flow Amid Growing Volatility
Dividend Resources Expand with Enhanced Shareholder Returns
Payout Increases or Special Dividends Announced

In the early session on the 19th, the KOSPI index plunged by 5 to 6 percent, triggering a temporary suspension of program sell orders (sidecar). Yonhap News Agency

As volatility increases in both domestic and global stock markets, investment capital seeking stable cash flows is flowing into dividend-focused Exchange Traded Funds (ETFs). The appeal of dividend ETFs is further heightened as some funds have increased their distribution payments or provided special distributions, driven largely by enhanced shareholder returns and portfolio rebalancing by the constituent companies.

According to ETF Check on August 19, over the past month there has been capital inflow into monthly dividend ETFs such as KODEX 200 Target Weekly Covered Call with 362.8 billion won, KODEX 200 Covered Call Active with 346.6 billion won, TIGER US Nasdaq 100 Target Daily Covered Call with 274.5 billion won, TIGER Dividend Covered Call Active with 255.2 billion won, and TIGER US Dividend Dow Jones with 202.5 billion won.

The main driver behind these capital inflows into dividend ETFs is the increase in dividend resources following expanded shareholder return initiatives by companies. Due to the corporate value-up program and strengthened shareholder return policies, major financial stocks and high-dividend companies in Korea have significantly raised their payout ratios, resulting in an overall rise in the level of distributions paid out by these ETFs.

In response, asset management firms have recently increased distribution amounts or provided special distributions. Mirae Asset Global Investments has, starting this month, raised the monthly distribution per share of the TIGER Korea Dividend Dow Jones ETF from 58 won to 61 won. The TIGER Korea Dividend Dow Jones ETF is a product that applies the investment philosophy of the leading US dividend growth ETF, SCHD, to the Korean stock market. It tracks the S&P Dow Jones 'Dow Jones Korea Dividend 30 Index,' which selects 30 financially sound Korean listed companies by meticulously evaluating dividend yield, dividend growth rate, return on equity (ROE), cash flow to debt ratio, among other financial metrics.

Additionally, the monthly end-distribution ETF TIGER Bank High Dividend Plus TOP10 ETF by Mirae Asset Global Investments raised its distribution in July from 87 won to 100 won per share, supported by enhanced shareholder returns among banking stocks.

Hanwha Asset Management set the July monthly distribution for its PLUS High Dividend ETF at 103 won per share, a 19.8% increase from the previous month (86 won).

Korea Investment Management has issued special distributions on three products: ACE US 500 Daily Target Covered Call (synthetic), ACE US Big Tech 7+ Daily Target Covered Call (synthetic), and ACE US Semiconductor Daily Target Covered Call (synthetic). While these products have maintained monthly distribution rates in the 1% range since listing, the policy was revised in June to apply monthly distribution rates of 2-3%. This new policy was implemented to proactively return accumulated distributable resources to investors, and Korea Investment Management plans to maintain a maximum 3% monthly distribution rate until all accumulated resources have been exhausted.

Samsung Active Asset Management's KoAct Dividend Growth Active, in July, provided a total of 290 won per share—raising the distribution rate from the standard 0.5% per month to 1.5% for the month by adding a 1% special distribution. KoAct Dividend Growth Active identifies and invests in companies with strong profit growth potential as well as those pursuing active shareholder return policies, such as expanding dividends or repurchasing and canceling treasury shares.

An official from an asset management firm stated, "As the determination of major companies to enhance shareholder returns grows stronger, the fundamental resources underpinning dividend ETFs have become richer," adding, "Securing cash flows through distributions can strengthen portfolio defensiveness, especially in box-range or volatile markets."

However, investors should exercise caution when investing based solely on high distribution rates or special, one-off distributions. Temporary special distributions may not be sustainable, and for some high-payout, covered call-type products, excessive distributions may undermine the ETF's net asset value (NAV) and principal in declining markets. Experts emphasize that investors should not be swayed simply by headline distribution rates—they should thoroughly assess the underlying asset price trends, long-term dividend growth prospects, and total return performance before making investment decisions.

This content was produced with the assistance of AI translation services.