By BLOOMBERG

SEOUL • The Winter Olympics aren’t the only thing putting a smile on South Korean faces this year, the country’s companies are finally getting out their checkbooks and increasing dividends.

Once notorious for having the lowest payout ratio in the world, dividends by Kospi 200 Index members are expected to rise 10% over the next three years, according to Bloomberg forecasts. This is double the 5% growth seen in the region’s MSCI Asia Pacific Index.

On top of record 2017 earnings, South Korean companies are reacting to government pressure on the country’s family-run conglomerates to put their cash hoards to work. In addition, South Korea’s biggest pension fund, the National Pension Service, is preparing to adopt a so-called stewardship code in 2018, giving it a greater say at shareholder meetings of companies it invests in.

“This time is different in South Korea — an owner of a chaebol can’t wield his power to control the company for his own interest,” said Hyun Choi, head of equities at Baring Asset Management Korea Ltd.

“There will be many companies this year that will change their dividend policy significantly and I am closely watching for those to change my portfolios.”

The trend of more generous payouts has been led by the country’s biggest company Samsung Electronics Co, which announced a doubling of annual dividends in October. Among 770 Kospi members, at least 70 hiked their payout ratios in 2017, including Samsung Fire & Marine Insurance Co, Lotte Chemical Corp, Hyundai Motor Co and Hyosung Corp, according to FnGuide Inc, a Seoul-based financial market data provider. The Kospi’s 12-month dividend per share reached a record high in 2017, according to Bloomberg data.

In fact there seems to be ample room for further growth, the Kospi’s payout ratio is just 16%, much lower than regional peers such as the Nikkei 225’s 27% and Taiwan Stock Exchange Taiex’s 63%. The benchmark’s forward dividend yield is about 2%, lower than the 2.3% yield on the country’s threeyear sovereign bonds and the 2.6% yield for the MSCI Asia Pacific.

“There are a number of reasons why South Korean companies should raise dividend payments, particularly considering their low return on equity,” said Lee Seung-Jun, MD at Samsung Asset Management. “If they stop excessive cash reserves and spend it on paying dividends or investment, it could boost their financial efficiency and raise the valuations of Korean stocks.”