A Long-Term Income Play in Korea, Available to US Investors!
Disclosure: I own shares of KT Corporation as of the date of this posting.
I’ve already got a Dividend Stock of the Month for May 2017, so I’m calling this my “Investment of the Week!” But let me be clear, I intend for this to be a long-term investment.
In this video, I explain what this company does and why I selected it from a long list of dividend-paying stocks in the telecom sector. The stock has gone up by about 5% in the two weeks since I released the video – so far, so good!
Shortly after I made this video, Moon Jae-In won the Korean presidential election. As I anticipated, he is already talking tough on the chaebol conglomerates, one of which is KT Corp. Should we be worried? Just the opposite – we should be excited about this!
Korea’s chaebol are generally well-managed, conservatively-run companies that are built for survival over the long run. What they lack are high dividend yields, big stock buybacks, or fully transparent management. Therefore, many institutional investors have not given as much weight to Korean stocks in their portfolios as they should.
After the recent scandals involving Samsung’s Lee Jae-yong, impeached president Park Geun-hye, and others, the new President Moon finally has the momentum he needs to push for reform of these massive conglomerates. The main goal of the reforms will to be to increase transparency, which will help these companies gain trust and attract more capital from abroad. Sure, they’ll probably create some extra compliance costs for KT and other chaebol, but I expect that negative to be far outweighed by the benefits of more capital rolling in. I think we’ll see the dividend payouts increase as part of this process too. After all, KT is sitting on over $8 billion of cash. In Korean won, that’s something like 88 zillion. (Just kidding) Note: Most Korean companies pay dividends annually, not quarterly, and they are variable from year-to-year.
Here’s another point I forgot to make during the video: Like many Korean companies, KT Corp is a good value relative to its earnings-per-share. Here are the trailing and forward P/E ratios for KT Corp relative to its biggest peers in the US telecom sector, even after the recent rally (data from Yahoo Finance):
- KT Corp: 12.6 trailing, 11.8 forward
- AT&T (T): 18.7; 12.9
- T-Mobile (TMUS): 34.7; 27.8
- Verizon (VZ): 15.2; 11.8
As I always say, due your own due diligence before investing and don’t rely solely on my conclusions. Other necessary disclaimers can be found on this page.