financial-industry:-expect-lofty-dividend-returns-for-banks-and-non-life-insurers

The author is an analyst of NH Investment & Securities. He can be reached at junsup@nhqv.com. — Ed. 

Due to: 1) recent stock market volatility; and 2) anticipated sound earnings, the attractiveness of financial stocks as high-dividend payers is growing. But, dividend visibility for banking and securities plays has deteriorated amid increased economic uncertainties. In terms of dividend payout, banks and non-life insurers appear the most attractive in the sector.

Financial sector DY rising

DY should remain attractive for financial sector players (banking, insurance, and securities) on: 1) 2022E earnings improvement for banks and non-life insurers; and 2) share price deterioration. However, concerns are mounting towards: 1) investment returns; and 2) potential additional provisioning.

Looking at 2022E DY, it is highest for banks (7.5%), non-life insurers (6.3%), securities (4.9%), and life insurers (4.0%), in that order. In terms of dividend visibility, the finest looking in order are non-life insurers, life insurers, banks, and securities. We advise dividend-seeking investors to focus on banks and non-life insurers. For life insurers and securities, we suggests concentrating on certain individual players offering high dividend returns.

With earnings set to hit new heights, DY looks attractive for banks and non-life insurers

[Banks] Banking players look set to log their historically-highest earnings and DPS in 2022. Except Kakao Bank, they should report annual DY of higher than 6% (HFG, WFG, IBK, BNK, DGB, and JB are all expected to report annual DY of 8%). But, fears linger towards potential further provisioning.

[Insurance] Non-life insurance companies will likely also enjoy their highest-ever earnings and DPS this year. Dividend visibility is robust—the big-3 non-life players (Samsung, DB, Hyundai) are expected to report DY of 6~7% (based on common shares). Among life insurers, Tongyang Life’s 2022E DY of 7.3% is to stand out.

[Securities] We believe that securities players’ earnings and DPS figures will decrease in 2022. Downward adjustments to earnings estimates are likely given economic and interest rate uncertainties. Affected by recent share price plunges, major players should display high DY of around 7%. Among small and mid-cap plays, we prefer Daishin Securities (DY of 8.7%) and DAOL (7.9%).


 

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