Riding the artificial intelligence (AI) memory super cycle, SK Hynix is demonstrating explosive cash generation capabilities and is expected to unleash nearly 400 trillion won (approximately $277.0 billion) in free cash flow (FCF) over the next two years. This massive amount of cash is forming a “golden dividend pipeline” that flows through SK Square to the top-tier holding company SK Inc., a development expected to completely reshape the financial landscape at the very top of the group’s governance structure.
According to a compilation of SK Hynix reports from seven major South Korean securities firms published in July—including NH Investment & Securities, KB Securities, BNK Investment & Securities, Korea Investment & Securities, Mirae Asset Securities, Daishin Securities, and Kyobo Securities—the company’s FCF this year is estimated to range from a minimum of 74.68 trillion won to a maximum of 226.8 trillion won, averaging approximately 159 trillion won (approximately $110.1 billion). Next year, the scale is projected to grow even larger, ranging from a minimum of 129.77 trillion won to a maximum of 332.8 trillion won, averaging about 249 trillion won (approximately $172.4 billion). The combined average forecast for the two years alone exceeds 400 trillion won.
This cash windfall, combined with SK Hynix’s aggressive shareholder return policy, heralds unprecedented dividends. Under its 2025–2027 shareholder return policy, SK Hynix has raised its annual fixed dividend to 1,500 won per share and maintains the principle of allocating 50% of generated FCF as a total resource pool for additional returns. Consequently, dividend resources for 2026 and 2027 are predicted to be approximately 79.55 trillion won (approximately $55.1 billion) and 124.47 trillion won (approximately $86.2 billion), respectively. This represents a near-vertical leap compared to the payout ratios of 7.7% in 2024 (net profit of 19.7 trillion won, dividends of 1.5 trillion won) and 4.9% in 2025.
Notably, SK Hynix completed its listing on the Nasdaq in the U.S. on July 10, issuing new American Depositary Receipts (ADRs) worth a total of $26.5 billion (approximately 38.3 trillion won). The funds raised are being fully allocated to core facility investments totaling 62 trillion won (approximately $42.9 billion), including the first-phase fab of the Yongin Semiconductor Cluster, a packaging fab in Cheongju, and the introduction of extreme ultraviolet (EUV) scanner equipment. Since tens of trillions of won in facility funds were covered by overseas capital, the internally generated FCF can be largely utilized for shareholder returns without the burden of debt repayment or capital expenditure.
SK Square to Retain Tens of Trillions of Won After Returning 30% of Dividends
The primary beneficiary of this cash windfall is SK Square, SK Hynix’s largest shareholder. SK Square’s stake in SK Hynix was slightly diluted from 20.07% to 20.00% due to treasury share retirements and the new ADR issuance, but the absolute scale of dividends has exploded, causing the dividends it receives to skyrocket to levels that completely shatter previous norms.
Applying securities firms’ forecasts, the dividends SK Square is expected to receive in 2026 range from a minimum of 7.47 trillion won to a maximum of 22.68 trillion won, averaging 15.91 trillion won (approximately $11.0 billion). For 2027, this expands to a range of 12.98 trillion won to 33.28 trillion won, averaging 24.89 trillion won (approximately $17.2 billion). This means dividend income, which remained in the hundreds of billions of won range—322 billion won in 2024 and 438.3 billion won in 2025—is set to jump vertically to tens of trillions of won within a single year.
The timing is also impeccable. Last year, SK Square transferred 11st to its subsidiary SK Planet and sold Dreamus Company, followed by the sale of Incross and One Store this year, effectively wrapping up its portfolio rebalancing. With the burden of funding multiple loss-making subsidiaries now gone, a massive influx of dividends is arriving.
According to its 2026–2028 mid-term shareholder return policy, SK Square must return more than 30% of its ordinary dividend income through cash dividends or share buybacks and retirements. Even after returning 30% of incoming dividends to shareholders, the retained cash remaining with SK Square is estimated at an average of 11.14 trillion won (approximately $7.7 billion) in 2026 (maximum 15.88 trillion won) and an average of 17.43 trillion won (approximately $12.1 billion) in 2027 (maximum 23.30 trillion won). Based on these funds, the company is expected to be able to aggressively pursue mergers and acquisitions (M&A) of global innovative companies within the next-generation AI and semiconductor value chain.
SK Inc.: From Zero to Annual Dividend Income in the 2 Trillion Won Range
The cash originating from SK Hynix and received by SK Square flows through another dividend process to the ultimate holding company, SK Inc. Since its launch, SK Square had not paid dividends from 2023 to 2025, focusing instead on share buybacks and retirements. However, it executed its first interim dividend this year, totaling 204.3 billion won (approximately $141.5 million). SK Inc., which holds a 32.16% stake in SK Square, secured 65.7 billion won (approximately $45.5 million) in tax-free cash from this dividend in June 2026, confirming the activation of the dividend pipeline.
If SK Square pays out 30% of its dividend resources as cash dividends going forward, the dividends flowing into SK Inc. are expected to reach between 720.5 billion won and 2.19 trillion won (approximately $1.5 billion) in 2026 (average 1.54 trillion won), and between 1.25 trillion won and 3.21 trillion won (approximately $2.2 billion) in 2027 (average 2.40 trillion won). For SK Inc., which received not a single won in dividends from SK Square in 2024 and 2025, this means a combined cash inflow of at least 2 trillion won over the two years starting in 2026.
Industry observers believe this cash flow will provide financial breathing room for the entire SK Group. The analysis suggests that with trillions of won in cash flowing annually into the top holding company without external borrowing in a high-interest-rate environment, SK Inc. has secured formidable ammunition for group-wide restructuring and securing new growth engines.
The Paradox of the Multi-layered Structure: SK Delays Merger Clock with ‘Bloodless Stake Strengthening’
The limitations of the “multi-layered” governance structure (SK Inc. → SK Square → SK Hynix), which prevents SK Inc. from fully enjoying these massive fruits, have been continuously pointed out by the capital market. In particular, regulations under South Korea’s Monopoly Regulation and Fair Trade Act restricting the activities of a “grandchild company” impose a shackle requiring SK Hynix to secure a 100% stake when pursuing M&A or establishing joint ventures, constraining agile “big deal” pursuits across the semiconductor value chain.
However, playing the merger card immediately is burdensome because SK Square’s valuation has soared too high. As of July 2026, SK Square’s common stock price is approximately 2.42 million won (approximately $1,676), while SK Inc.’s stock price remains in the 200,000–300,000 won range. If a merger were executed, the merger ratio would surge to a level of 1:8 to 1:12, forcing SK Inc. to issue a massive number of new shares, which would significantly dilute Chairman Chey Tae-won’s stake in SK Inc. (approximately 17.9%).
In response, SK Inc. is opting for a “bloodless stake strengthening” strategy instead of a forced merger, securing practical benefits. Through SK Square’s treasury share retirements, SK Inc. has increased its stake in SK Square from 29.98% to 32.17% over the past three years without injecting a single won of capital. This utilizes the principle that when treasury shares are retired, the number of shares held by all shareholders remains the same, but the total number of outstanding shares decreases, causing the ownership percentage to rise naturally. This is evaluated not only as a strong defense in future shareholder meeting proxy battles but also as a meticulous groundwork operation that could dramatically reduce the number of new shares to be issued during a future merger, thereby minimizing damage to Chairman Chey’s stake.
An investment banking industry source stated, “Buying back and retiring treasury shares is particularly helpful in strengthening the control of the largest shareholder,” adding, “We are actively recommending treasury share retirements to controlling shareholders.”
Will the Semiconductor Downcycle Trigger the ‘Big Deal’?
Experts observe a high likelihood that SK’s final governance restructuring card will be played decisively when the memory semiconductor industry enters a downcycle. Currently, SK Hynix is enjoying peak valuations through its Nasdaq ADR listing, a phase most unfavorable to the holding company. However, a period of “valuation reversal” could arrive if a macroeconomic downturn or industry slowdown causes the market capitalizations of SK Hynix and SK Square to temporarily plummet, while the value of the more diversified SK Inc. becomes relatively prominent.
Some in the industry believe that at this point, SK Inc. will execute the merger under the pretext of lifting the grandchild company regulations. The outlook is that until then, SK Inc. will fully operate the cash pipeline originating from SK Hynix and silently wait for the right time to merge. This is the backdrop for growing expectations in the capital market that the chronic multi-layered governance structure discount could actually be converted into a dividend premium.