Korean ETF investors shifted from covered call funds to high-dividend ETFs on the 22nd, according to KOSCOM CHECK data. The PLUS High Dividend Weekly Covered Call ETF posted a 24.51% annual dividend rate but suffered a -27% one-year return, prompting investors to seek stocks offering both dividends and price gains. The trend aligns with government corporate value policies and financial sector shareholder return expansion.
Covered Call ETFs Record Sharp Losses Despite High Distribution Rates
Covered call ETFs dominated the highest annual dividend rate rankings on the 22nd, with PLUS High Dividend Weekly Covered Call at 24.51% and KODEX US Nasdaq 100 Daily Covered Call OTM at 20.37%, according to KOSCOM CHECK. However, PLUS High Dividend Weekly Covered Call recorded a -27% one-year return despite its top dividend rate. RISE 200 High Dividend Covered Call ATM declined 22.10% over the same period.
Covered call ETFs distribute option premiums from selling call options alongside stock dividends, enabling high monthly distributions. The structure limits participation in strong upward price movements, as gains above a certain level transfer to option buyers. When distributions exceed operating returns to maintain high payouts, net asset value (NAV) can decrease.
An asset management industry source stated, "The high returns of existing covered call ETFs were mostly influenced by Samsung Electronics and SK Hynix stock price increases. If the rise in top KOSPI stocks is not high, it may no longer be possible to achieve high returns through covered calls."
PLUS High Dividend ETF Demonstrates Resilience in Volatile Market
PLUS High Dividend ETF recorded assets under management (AUM) of 2.3189 trillion won, ranking 29th among domestic equity ETFs. The fund, listed in 2012, has operated for over 10 years as a representative high-dividend ETF.
The ETF's structure involves investing in companies that consistently pay dividends—including financial, insurance, and securities stocks—and distributing received dividends to investors without using derivatives. This approach allows investors to capture full share price appreciation in rising markets.
PLUS High Dividend ETF declined only 3.45% during a recent month when KOSPI fell over 23%. The fund posted a 26.38% one-year return and a 3.99% dividend yield. Top holdings include Industrial Bank of Korea (5.52%), DB Insurance (5.45%), and NH Investment & Securities (5.12%).
Expectations for dividend expansion are growing around financial stocks as the government's corporate value enhancement policy and the financial sector's shareholder return expansion continue. Market observers view rising corporate dividend propensity as strengthening high-dividend ETF competitiveness, as investors can expect corporate performance improvement, dividend expansion, and share price appreciation together rather than relying on option premiums.
JP Morgan and Fahmi Quadir Signal Interest in Korean Corporate Governance
JP Morgan recently analyzed that domestic corporate governance improvement is likely to become a major investment theme again, noting the need to pay attention to undervalued companies with low price-to-book ratios (PBR). Hedge fund manager Fahmi Quadir, known as an activist investor, plans to invest in the Korean market focusing on undervalued companies with PBR below 1.
FAQ
What caused the PLUS High Dividend Weekly Covered Call ETF to decline 27% over one year?
The PLUS High Dividend Weekly Covered Call ETF recorded a -27% one-year return despite a 24.51% annual dividend rate. The structure limits participation in strong upward price movements, and when distributions exceed operating returns, net asset value can decrease. An asset management source noted that high returns of existing covered call ETFs were mostly influenced by Samsung Electronics and SK Hynix stock price increases, suggesting future returns may be constrained if top KOSPI stocks do not rise significantly.
How did PLUS High Dividend ETF perform during recent market volatility?
PLUS High Dividend ETF declined only 3.45% during a recent month when KOSPI fell over 23%, demonstrating defensive characteristics. The fund recorded a 26.38% one-year return and a 3.99% dividend yield. With 2.3189 trillion won in assets under management, it ranks 29th among domestic equity ETFs and holds positions in consistent dividend payers including Industrial Bank of Korea (5.52%), DB Insurance (5.45%), and NH Investment & Securities (5.12%).
