Shareholder Activism Drives Growth of Dividend Payment
The amount of cash dividends paid by the top five business groups in South Korea surged by more than 10 trillion won (US$8.94 billion) over the last five years. As the era of shareholder activism has dawned on the country, the size of dividend payouts is expected to grow steadily.
The total amount of dividends paid by 53 listed firms under the country’s top five business groups, including Samsung, Hyundai Motor, SK, LG and Lotte, which announced their dividends until Feb. 26, stood at 18.70 trillion won (US$16.71 billion), up as much as 10.87 trillion won (US$9.71 billion), or 138.7 percent, from 7.83 trillion won (US$7 billion) in 2014, according to financial market researcher FnGuide on Feb. 27. The figure has more than doubled over the past five years. It has also increased by a whopping 4.54 trillion won (US$4.05 billion), or 32 percent, in one year from 14.17 trillion won (US$12.66 billion) in 2017.
The total amount of dividends last year is estimated to reach 20 trillion won (US$17.87 billion), including companies which have not decided the size of dividends yet.
Samsung Group paid out the most dividends among the top five business groups. The amount of the group’s dividends last year came to 11.69 trillion won (US$10.44 billion), showing a 194 percent growth in five years. Samsung Electronics paid out 9.62 trillion won (US$8.60 billion) of dividends last year, a triple increase compared to 2014 and a record high. The amount of Samsung Electronics’ consolidated cash holdings grew by 24.7 percent on year to 104.21 trillion won (US$93.13 billion) last year, surpassing the 100 trillion won (US$89.37 billion) mark for the first time.
The total amount of SK Group’s dividends stood at 2.90 trillion won (US$2.59 billion) last year, up 172.3 percent from 2014, reaching a record high. It is the second biggest figure after Samsung Group. SK Hynix increased its dividends by nearly five times from 218.40 billion won (US$195.17 million) in 2014 to 1.03 trillion won (US$916.89 million) in 2018 thanks to the semiconductor boom.
Hyundai Motor Group saw its dividends rise by 21.5 percent to 2.14 trillion won (US$1.92 billion) last year compared to 2014. The figure was similar with 2.05 trillion won (US$1.83 billion) a year earlier. No company had a significant growth in dividends due to the worsening performance of the group as a whole, except for Kia Motors.
However, the group is forecast to expand its dividends starting from this year as U.S. hedge fund Elliott has been strongly demanding the expansion of dividends and exercising the shareholder rights. Elliott has strongly urged Hyundai Motor to pay out 4.50 trillion won (US$4.02 billion) of dividends, which is more than three times the group’s net profits, and shareholdersto vote for its proposal for higher dividends at the shareholders' general meeting to be held next month. Hyundai Mobis also announced on Feb. 26to pursue a shareholder return policy worth 2.60 trillion won (US$2.32 billion) in total, including 1.1 trillion won (US$983.02 million) of dividends and 1 trillion won (US$893.66 million) of the purchase of treasury stocks, for three years.
The total amount of dividends paid by LG Group and Lotte Group last year came to 1.31 trillion won (US$1.17 billion) and 656.90 billion won (US$587.04 million), respectively, up 45.6 percent and 422.9 percent. LG Group had a relatively lower growth in dividends because of poor performance of some affiliates. LG Display decided not to pay out any dividends last year for the first time in five years.
The investment banking (IB) industry expects that the country’s top five business groups will continuously boost their dividend payouts because the figures are still much lower than those of foreign companies.