South Korea Stocks Rise on Trust in Shareholder Returns

An analysis by KB Securities suggests that long-term trust in shareholder returns is more important than one-off return programs for driving stock prices upward. The study, which examined the cases of Apple and Taiwan's TSMC, found that these companies' stocks trended upward even after growth momentum faded due to their commitment to prioritizing shareholders.

Apple, for instance, suspended dividend payments from 1996 to 2012 but resumed them under CEO Tim Cook. The company's massive $60 billion buyback program in 2013 created a catalyst for its rebound despite guidance cuts. Earnings per share growth outpaced net income growth, demonstrating that the share of profits enjoyed by shareholders continued to grow even as overall growth slowed.

TSMC, on the other hand, exemplifies a dividend-focused approach. After maintaining a flat dividend policy until 2014, TSMC raised its dividend per share by 50% in 2015 and formally documented its dividend policy. The company has consistently returned 70% of free cash flow as quarterly dividends and has never reduced dividend payments.

The report identified several South Korean companies that have built trust with shareholders through consistent dividend growth or buyback programs, including Samsung Electronics, Hyundai Motor, Kia, LG, POSCO Holdings, and KT&G. These companies' stocks are more likely to perform well in a high-interest-rate environment where simply maintaining dividends is not enough.