Of nearly 2,300 South Korean firms listed on the Korea Exchange, two companies logged operating losses for two consecutive years and at the same time saw their dividend yield exceed 5 percent, according to recent data.
These were express bus line operator Chunil Express and traditional rice wine maker Kook Soon Dang. Chunil Express reported 2 billion won operating loss ($1.7 million) in 2017 and 3.1 billion won loss in 2018, while Kook Soon Dang’s operating loss came to 4.6 billion won in 2017 and 3 billion won in 2018, according to data from financial analytics plaform Deepsearch.
Despite their losses, both Chunil and Kook Soon Dang maintained a high dividend payment, even risking sale of assets to secure non-operational profit, which in the end left the controlling family with substantial dividend income.
Courtesy of Yonhap
In particular, Kospi-listed Chunil Express appears to have sought cash for gift tax payment in a family business succession plan.
According to regulatory filings, Chunil’s late ex-Chairman Park Nam-soo in the first quarter of 2015 had transferred his entire 68.8 percent stake to his grandsons, the incumbent CEO Park Do-hyun and Vice President Park Ju-hyun. Also, their father Park Jae-myung in November 2016 transferred a combined 3 percent stake to the two. As a result, Do-hyun owns 44.97 percent and Ju-hyun holds 37.24 percent.
From 2015 to 2018, the two scions have received about a combined 400 billion won as dividends, without deducting taxes, a Deepsearch report noted.
This came as a result of extraordinarily high dividend payments, irrespective of the company’s consecutive losses. Chunil in 2017 paid 15,300 won dividend per share to record 16.2 percent dividend yield, in a year when its operating loss was dwarfed by 27.1 billion won net profit due to sale of properties. The next year, when the company saw 207 million won net loss, it paid 6,000 won dividend per share, with 7.6 percent dividend yield.
Kook Soon Dang also benefited its three family shareholders with abnormal dividend payment.
The tendency has put the company and family owners in hot water as the company’s high dividend contradicts its shrinking revenue that caused a four-year losing streak since 2015 -- putting the firm on the verge of delisting from Kosdaq.
The family-controlled company’s CEO Bae Jung-ho own 36.59 percent stake and his siblings Bae Sang-min and Bae Eun-kyung holding 4.06 percent and 1.33 percent each. They received combined dividends amounting to 3.9 billion won over the course of four years, while its operating loss over the cited period came to 22.2 billion won.
By Son Ji-hyoung (firstname.lastname@example.org)