Expectations for Samsung Electronics’ shareholder return policy are also growing as SK Hynix announc..

사진 확대 Samsung Electronics and SK Hynix.[Yonhap News]

Expectations for Samsung Electronics’ shareholder return policy are also growing as SK Hynix announced a plan to buy back and burn 40 trillion won worth of treasury stocks, the largest in the history of domestic listed companies. Initially, the industry cited Samsung Electronics and SK Hynix’s expansion of shareholder returns as one of the variables that determine foreign supply and demand and stock price revaluation. Samsung Electronics will announce additional shareholder return policy as early as this month.

SK Hynix’s “Return of shareholders of 50% or more of surplus cash”

사진 확대 The headquarters of SK Hynix in Icheon, Gyeonggi-do.[Yonhap News]

According to the industry on the 20th, SK Hynix held a board meeting the previous day and decided to purchase 24.07 million common shares on the market and incinerate them all. The estimated acquisition amount is 40.43 trillion won.

In particular, SK Hynix has also decided on a new shareholder return policy that calls for the return of more than 50% of its free cash flow (FCF) over the next three years. According to the previous day’s announcement, the company decided to expand the scale of shareholder return from the existing “cumulative FCF within 50%” to “more than 50%. The company plans to buy treasury stocks for three months from this day to November 19 and incinerate them all at once.

In response, Baek Young-chan, a researcher at Sangsang Certification Rights, said, “The expression of ‘50% or more’ theoretically opens the top so that even 100% of FCF can be returned to shareholders,” adding, “It can be interpreted quite positively as an expression of the company’s strong will to actively return cash to shareholders rather than accumulating it.”

Stock market analysts say SK Hynix’s announcement of shareholder returns will signal a rebound in stock prices.

Kim Un-ho, a researcher at IBK Investment & Securities, said, “It will serve as an opportunity for the stock price to rebound, which has fallen compared to fundamental physical strength,” adding, “The acquisition of 24 million shares over the next three months will affect the improvement of supply and demand.”

Lee Kyung-bin, a researcher at Samsung Securities, also said, “The retirement of 40 trillion won in treasury stock purchases will have the effect of reducing 3.3 percent of the number of issued shares. Shareholder return is a sign of management’s continuity of profits and a catalyst that highlights the stock price’s ability to rise.”

What kind of gift bundle does Samsung Electronics get?

사진 확대 A panoramic view of Samsung Electronics’ Pyeongtaek plant. [Courtesy of Samsung Electronics]

Now, the market’s attention is on Samsung Electronics, the next batter. As SK Hynix preemptively raises the level of shareholder return, expectations are spreading that Samsung Electronics will also announce policies that meet market expectations.

Samsung Electronics’ current shareholder return policy is a structure that uses 50% of the FCF (surplus cash flow) that occurred for three years from 2024 to 2026 to pay regular dividends of 9.8 trillion won per year and then additionally returns them when remaining financial resources are generated.

Stock industry sources believe that Samsung Electronics may also start burning its own shares or expanding cash and special dividends. In particular, Samsung Electronics’ shareholder return was estimated at around 100 trillion won.

KB Securities analyzed, “In the case of Samsung Electronics’ 50% shareholder return policy for its three-year (2024-2026) cumulative free cash flow, the size of the special dividend is estimated to exceed at least 100 trillion won,” adding, “The large-scale shareholder return will serve as a strong catalyst for not only the increase in Samsung Electronics’ corporate value but also the revaluation of the entire KOSPI market.”

Eugene Investment & Securities also explained, “Samsung Electronics’ shareholder return capacity is expected to reach the mid-100 trillion won level this year,” adding, “Based on the current three-year (2024-2026) policy, the first shareholder return plan is likely to be proposed soon.”

Researcher Baek said, “Samsung Electronics is also likely to expand its treasury stock acquisition, cancellation, cash dividend, and special dividend,” but added, “It is unlikely that we will even include a specific phrase such as ‘return more than 50% of FCF to shareholders’ like SK Hynix.”

Meanwhile, global semiconductor companies are also returning shareholders one after another. Micron, a rival of Samsung Electronics and SK Hynix, said it would return 50-100 percent of its excess cash and SanDisk 100 percent to shareholders.