Return to Shareholders
A lot of attention is being paid to Samsung Electronics as the company is expected to lay out cash dividend and shareholder return through the sale and cancellation of its treasury stock shortly after the company releases its third-quarter earnings.
This is because dividends for shareholders are expected to reach an astronomical sum considering the recent record streaks now that at the end of last year, the company said it will utilize 50% of its free cash flows in 2016 and 2017 for shareholder return.
According to the industry and the Financial Supervisory Service's online disclosure system on October 23, the total shareholder return ratio which means the proportion of shareholder return (total dividends plus the amount of treasury stock purchases) in Samsung Electronics' net profit stood at 49.7% last year. The company recorded net income of 22.415 trillion won (US$20 billion), dividends of 3.992 trillion won (US43.59 billion) and repurchase of treasury stock of 7.139 trillion won (US$6.42 billion) respectively.
This represents a 10 percentage point increase from the previous year's total shareholder return ratio (39.2%) which means that more money was paid to shareholders directly or indirectly from earnings through business activities.
If this ratio is maintained this year, the amount of funds invested in paying dividends and purchasing treasury stocks will tower over 20 trillion won (US$18 billion). This is because securities firms are expecting Samsung Electronics’ net income will reach an average of 41.2 trillion won (US$37 billion) double the figure of last year.
In the first half of this year, Samsung Electronics paid 1.938 billion won (US$1.74 million) to shareholders through two quarterly dividend payments and poured about 4.3 trillion won (US$3.8 billion) in treasury stocks by buying 1,659,600 ordinary shares and 414,900 preferred stocks.
In the end, in order to meet a 50% shareholder return ratio, the company needs to inject more than 13 trillion won (US$11 billion) into dividends and treasury stocks in the second half. Some analysts are already expecting that the quarterly dividend per share that was 7,000 won (US$6) in the first and second quarters of this year will go up or substantial dividends will be paid at the end of the year.
It boosts this prospect that Samsung Electronics’s dividend per share (based on common stocks), which rose to 28,500 won (US$25) last year after 8,000 won (US$7) in 2012, 14,300 won (US$12) in 2013, 20,000 won (US$17) in 2014 and 21,000 won (US$11) in 2015.