Matthews Asia: Dividend Boost From Korea

Dividend Boost From Korea by Michael Han, CFA – Matthews Asia

During this year’s earnings season, South Korea investors saw major businesses significantly raise dividends. Many companies increased dividends despite softer earnings for 2015. Overall, dividends from 2015 earnings grew 20%. While surprising, this was somewhat expected when President Park Geun-hye’s administration rolled out new legislation in 2014 to discourage Korean corporations from the practice of hoarding cash by increasing dividends or boosting domestic investment.

According to the law, shareholders of companies designated as dividend achievers—which had payouts that were above average or whose dividend grew more than 30%—will see their dividend tax rate meaningfully decline from 14% to 9% over the next three years.

The National Pension Service (NPS),...