Dizzy from the 'roller-coaster Kospi'? US Dividend Dow Jones ETFs offer a smoother ride

As volatility in the domestic stock market rises, investors are increasingly turning to dividend stocks in search of stable returns. ETFs tracking the US Dividend Dow Jones index — which offer diversified exposure to financially sound American companies with strong dividend growth — have emerged as a leading option.

The US Dividend Dow Jones index covers 100 high-quality US dividend-growth stocks. Constituents are selected through a comprehensive evaluation of factors including at least 10 consecutive years of dividend history, five-year dividend growth rate, return on equity and debt-to-cash-flow ratio.

The index focuses on identifying financially sound companies with the capacity to consistently grow their dividends, rather than simply those with high current yields. The approach is designed to avoid the "yield trap" — where a falling share price artificially inflates the dividend yield — and instead pursue long-term dividend growth.

Another distinguishing feature is broad sector diversification across energy, consumer staples, healthcare and other industries, which reduces dependence on any single sector. During periods when growth-stock-driven markets pull back, dividend income and sector diversification can help lower overall portfolio volatility.

Investment flows into US Dividend Dow Jones ETFs listed in South Korea have been growing. Among them, "TIGER US Dividend Dow Jones," managed by Mirae Asset Global Investments, is the largest by assets. As of Thursday, its assets under management stood at 4.56 trillion won ($3.41 billion).

Retail investor buying has also continued. According to Koscom ETF Check, retail investors net purchased 334.3 billion won worth of "TIGER US Dividend Dow Jones" over the past three months.

Products that combine the US Dividend Dow Jones strategy with a covered-call approach are also available for investors seeking regular cash flow. A covered-call strategy involves holding the underlying asset while selling call options to collect option premiums — supplementing dividend income with those premiums to fund distributions.

Mirae Asset Global Investments' "TIGER US Dividend Dow Jones Target Daily Covered Call" sells call options on a daily basis, targeting an annualized option premium of around 10 percent. Distributions are paid in the middle of each month.

"TIGER US Dividend Dow Jones Target Covered Call 2" reduces the proportion of options sold, increasing participation in the underlying asset's price appreciation. It also targets annual distributions of around 10 percent, with payouts at the end of each month. Used together, the two products allow investors to structure a distribution schedule that pays out twice a month — once mid-month and once at month-end.

"In a market where volatility has expanded, it is more important to have a strategy that allows you to invest consistently regardless of market swings than to try to predict short-term price direction," said Lee Jeong-hwan, head of the strategic ETF management division at Mirae Asset Global Investments. "Combining the dividend growth potential of the US Dividend Dow Jones with the option premiums from a covered-call strategy allows investors to pursue regular cash flow while navigating market changes."