This is the second installment of a three-part series looking into Korean companies’ dividend payout policies, the reasons behind them and future prospects. – Ed

Local business tycoons and foreign investors are basking in cash windfalls as Korean companies, traditionally stingy in returning profits to shareholders, increase dividend payouts this year, data showed Wednesday.

The number of “superrich” shareholders who have earned or will earn more than 10 billion won ($8.2 million) in year-end cash dividends will increase to 26 from 18 a year earlier, said Chaebul.com, which traces the wealth of Korean conglomerate owners. 

Topping the dividend income ranking is Samsung Electronics chairman Lee Kun-hee, with 177.41 billion won, as the tech giant distributed a total of 2.9 trillion won in dividends in January. Chung Mong-koo, chairman of Hyundai Motor Group came in second with 77.29 billion won in dividends, followed by SK Group chairman Chey Tae-won with 56.02 billion won and Hyundai Motor Group vice chairman Chung Eui-son with 49.96 billion won. 

Foreigners as a whole are to take home 5.75 trillion won in dividends, which is 36.4 percent of the total payouts paid or promised as of Feb. 26, according to FN Guide, a local financial data provider.

Year-end cash dividends are up 28 percent so far this year, reaching a new record of 18.3 trillion won, the Korea Exchange said. Given that some companies that close their book in December are yet to finalize their year-end dividend level, the total volume is likely to go up.

The hikes come as investors increasingly demand higher dividends amid slowing economic growth and unsatisfactory stock market performance. Also behind is the government’s push on companies to encourage more spending of cash reserves in investment, job creation and shareholder returns.

Park Sun-sup, head of Chaebul.com, pointed out that minority shareholders in conglomerates’ stocks should pay less in tax and get higher dividends than the largest shareholders, who are in many cases members of the family that controls the company.

“It is true that Korean companies used to be stingy in dividend payouts. But when they raise them, they should keep in mind that the purpose of the dividend distribution is shareholder returns for all, not just for some,” Park said.

“The current ‘dividend feast’ is only for chaebol and foreigners.”

Korea’s dividend payout ratio is currently 20.2 percent, much lower than the average dividend payout ratio of newly emerging markets of 34.6 percent, according to industrial data.

Choi Min, quantitative analyst at Shinhan Investment Corp., said Korean companies will keep raising dividends this year, given their return on equity -- a common measure of shareholdings’ earnings from their stock holdings -- is still too low.

As the slowing economic growth trend is expected to continue, companies will see limited investment opportunities and rather use excessive cash in dividends, Choi said.

“Higher dividend payout rate will eventually lead to higher valuation of the local stock market,” she said.

By Kim Yoon-mi (yoonmi@heraldcorp.com)