Samsung to unveil new shareholder return programme

Samsung Electronics will unveil its new shareholder return programme late this month, industry officials said on Wednesday, amid speculation that the South Korean giant could return significant capital to its stockholders in upcoming years for the group heir’s smooth succession.

Samsung, the world’s largest memory chip and smartphone maker, is expected to announce its new shareholder return initiative for the 2021-2023 period on January 28 along with its fourth-quarter earnings report.

Local analysts widely expect that Samsung’s new policy will be more shareholder-friendly than the previous one as the company is likely to significantly increase its shareholder returns, reports Yonhap news agency.

In 2017, Samsung announced a three-year shareholder return program that promised to return a minimum of 50 percent of its free cash flow (FCF). It then offered a quarterly dividend of 354 won per share, which translated into 28.8 trillion won of total dividend returns in the 2018-2020 period.

FCF refers to the cash left over after a company pays its taxes, operating expenses and capital expenditures.

If there is FCF left even after dividend payouts, Samsung said the remaining portion will be used either for additional cash dividends or share buybacks.

Analysts estimate that the value of Samsung’s remaining FCF even after dividend payouts in the past three years reached around 7 to 8 trillion won.

They predict that Samsung will use remaining FCF for additional cash dividends for shareholders rather than share buybacks considering that Samsung Group heirs, including Samsung Electronics Vice Chairman Lee Jae-yong, need to pay massive inheritance taxes following the death of group chief Lee Kun-hee in October.

Samsung heirs are estimated to pay around 11 trillion won in inheritance taxes for the late chief’s stock assets worth around 19 trillion won.

Analysts predict that Samsung can give extra cash dividends of around 1,000 won per share. Combined with the quarterly dividend of 354 won per share for the fourth quarter, Samsung stockholders are expected to get returns of at least 1,300 won per share in the upcoming weeks.

Samsung is expected to enjoy robust earnings this year with rising expectations of a “super cycle” in the memory chip industry. Some analyst have predicted Samsung’s annual operating profit may reach around 50 trillion won.

Samsung has been keeping mum on its new shareholder return program, but industry insiders said the company will be assessing various scenarios related to enhanced dividend policy.

Some critics pointed out that increased dividend payouts may deter Samsung’s merger and acquisition (M&A) plans for future growth.

In 2017, Samsung stated that future M&A investments will not be deducted from FCF.