Samsung's record shareholder return still falls short of lofty investor expectations
Samsung Electronics unveiled Korea’s biggest shareholder return plan ever, but it was still not enough to satisfy investors who wanted a larger payout along with clearer buybacks.
Samsung Electronics' office in Seocho District, southern Seoul, on Aug. 21YONHAP
Samsung Electronics announced its largest shareholder return plan in Korean corporate history. However, investor enthusiasm did not last even a day.
Samsung Electronics' board approved Friday a plan to return about 90 trillion won to 110 trillion won ($64.9 billion to $79.4 billion) to shareholders this year alone — roughly five times the previous record of 20.3 trillion won set in 2020.
The company also announced that it will first pay about 30 trillion won in cash dividends in the third quarter. That amounts to roughly 5,000 won per share, more than 13 times the second quarter dividend of 374 won per share.
Following this, shares of Samsung Electronics surged to an intraday high of 285,000 won, only to give up all their gains in after-hours trading and close at 270,000 won, below the previous session's close.
The reversal has fueled speculation that the plan fell short of expectations among the company's roughly 8 million shareholders.
Some say it was an expected move.
“A significant step-up in absolute shareholder returns, although largely expected,” Morgan Stanley said in a report, according to financial data and news platform Investing.com. The U.S. investment bank also added that it was “slightly below” recent investor expectations.
KB Securities had previously estimated that Samsung Electronics' shareholder returns this year could reach as much as 200 trillion won.
The Kospi and Kosdaq indexes are displayed on a digital board in a trading room at Hana Bank in central Seoul on Aug. 21.NEWS1
The lack of a specific plan for share buybacks or cancellations also contributed to shareholder disappointment, as the specific methods and size of the remaining shareholder returns will be determined at a board meeting in January next year, after the company's full-year results are finalized.
The contrast was particularly stark after crosstown rival SK hynix announced plans to buy back and cancel 40 trillion won worth of its own shares.
While Samsung Electronics shares tumbled after the market closed, SK hynix shares climbed from 1.73 million won to 1.76 million won.
Samsung Electronics' decision to maintain shareholder returns at 50 percent of free cash flow (FCF) has also drawn criticism. Some have argued that its policy returns only “half” as much to shareholders compared to U.S. rivals SanDisk and Micron, which have pledged to return 100 percent of excess cash to shareholders.
Industry officials, however, say directly comparing FCF with excess cash can be misleading.
FCF is the cash a company generates after subtracting expenditures required for capital investments. Excess cash, by contrast, is calculated by taking the cash a company holds and deducting funds needed for various factors, such as investment, operations and financial stability.
There is also no standardized formula for calculating excess cash. If it is calculated conservatively, even a pledge to return “100 percent” may result in a relatively modest amount actually being distributed to shareholders.
Samsung Electronics' flag is seen in front of the company's Seocho office in southern Seoul on July 30.YONHAP
Analysts say disappointment over Samsung Electronics' shareholder return policy could weigh on the stock market in the short term.
“Disappointment with Samsung Electronics' shareholder return policy is expected to weigh on the Kospi,” Seo Sang-young, an analyst at Mirae Asset Securities, said. “However, bargain hunting could emerge depending on new products and developments in the memory industry to be unveiled at Hot Chips 2026.”
Hot Chips is an annual semiconductor conference focused on high-performance processors and related integrated circuits.
Some analysts also expect foreign capital inflows if disappointment over the shareholder return plan drives Samsung Electronics shares lower, as a decline in the share price would raise its dividend yield.
The plan could also provide support for the Korean won. If Samsung Electronics converts its foreign currency holdings into won to finance the large-scale shareholder returns, it could increase the supply of U.S. dollars in the foreign exchange market.
“The dollar-won exchange rate could fall to around the 1,350 won level if demand for currency conversion is further boosted by interim corporate tax payments due by the end of August and efforts to secure investment funds for the government's three megaprojects,” Park Sang-hyun, an analyst at iM Securities, said. The state-led three megaprojects are large-scale initiatives aimed at strengthening Korea’s competitiveness in semiconductors, physical AI and AI data centers.
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
