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The outlook for SK Innovation shares remains bright, with the National Pension Service (NPS) increasing its stake in the refinery-chemical firm, industry analysts said Sunday.

They said the pension fund's investment was an acknowledgement of SK Innovation's growth potential and its stable dividend policy, which allows the NPS to contain volatility and seek benefits from a long-term investment.

According to the NPS' regulatory filing, the pension fund increased its stake to 10.63 percent, or 9.83 million shares, as of Oct. 3, up from 9.62 percent or 9.01 million shares on March 14, 2016. The NPS has been net purchasing shares worth 52 trillion won ($43.84 billion) since August as it is refurbishing its portfolio.

The NPS purchases are seen as a strategy to contain volatility in its portfolio by investing in shares with high dividends and stability.

SK Innovation has been bolstering its dividend policy since 2014, when its profitability fell amid an oil price plunge in 2014. The annual dividends stood at 4,800 won per share in 2015, but rose to 6,400 won in 2016 and 8,000 won in 2017 and 2018.

Along with the annual dividends, SK Innovation has been distributing interim dividends worth 1,600 won per share since 2017.

During the same period, S-Oil, one of the best dividend stocks in the domestic refinery industry, reduced its interim dividends from 1,200 won in 2017 to 600 won in 2018 and 100 won for this year, as a consequence of an industry-wide slowdown.

SK Innovation said it would decide this year's annual dividends based on its year-end earnings, but stressed that it planned to keep an investor-friendly dividend policy.

Analysts said another factor that attracted the NPS was the growth potential of the company's rechargeable battery and materials businesses. The analysts said the NPS' investments in the battery business would return as profit in 2021, and expectations were already pumping up the share price.

By the end of this year, SK Innovation's total battery cell capacity will reach 20 gigawatt hours. When these facilities begin commercial operation, the company's global market share is expected to jump to the world's No. 5 from No. 8 now.

To finance its battery investments, the company last month decided to sell its stakes in two Peruvian gas fields for 1.25 trillion won.

In the refinery business, there is growing demand for low-sulfur fuel for ships amid the looming International Maritime Organization 2020 sulfur cap. The cap lowers the sulfur content of fuel oil from 3.5 percent now to 0.5 percent by Jan. 1, 2020.

SK Energy, SK Innovation's refinery unit, has been building a vacuum residue desulfurization facility in Ulsan, and plans to increase its daily production capacity of low-sulfur oil to 40,000 barrels by next April.

"With the sales of the Peruvian gas fields, the company faces reduced pressure in financing its battery business," DB Financial Investment analyst Han Seung-jae said. "Given the company's anticipated improvements in its refinery business next year and the mid-term growth potential of the battery business, the SK Innovation shares are attractive."