South Korea's Corporate Value-Up Program: What is overlooked

South Korea's Corporate Value-up Program aims to replicate the Tokyo Stock Exchange's Success in 2023 by incentivizing companies to distribute larger dividends. However, a good dividend is not simply larger dividends and KOSPI 200 lags behind Nikkei 225 in various aspects, some of which include:

• 88% of Nikkei 225 companies pay dividends more than once in a year (KOSPI 200: 15%)
• 76% of Nikkei 225 companies specify quantified dividend targets
  (KOSPI 200: 55%)
• 63% of Nikkei 225 companies' dividend guidance as of Q3 was spot on .
  (KOSPI 200: N/A)
• 44% of Nikkei 225 companies sustained dividends without a cutback since FY2014 (KOSPI 200: 18%)

While pushing for a larger dividend disbursement is necessary, it will take a multifaceted approach for the Value-up Program to truly enhance the attractiveness of South Korean dividends.

On a brighter side, South Korea's economy is expected to be revitalized in 2024 with many top dividend payors' earnings turning around, making it a favorable year to launch the Value-up Program. Our analysis showed that KOSPI 200 is better placed than Nikkei 225 in EPS/DPS, FCF/DPS and leveraged ratios, thus having more room to increase the dividends.

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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.