Samsung to pay record dividends, more through 2023; Q4 profit jumps

Samsung Electronics Co. has announced that it will pay record-high dividends to its shareholders this year and raise dividends further in coming years in a move to improve shareholder value.

After announcing solid fourth-quarter earnings on Thursday, the South Korean tech giant, however, warned of a weaker first quarter, citing a firmer local currency and costs related to the ramp-up of new chip production lines.

Samsung will pay a record 13.12 trillion won ($11.8 billion), or 1,932 won per share, in dividends to shareholders registered as of the end of 2020, the company said in a regulatory filing on Jan. 28.

The per-share dividend payment includes a special dividend of 1,578 won, higher than market expectations of around 1,000 won. The dividends will be paid out in April following approval at its annual general meeting in March.

In an enhanced shareholder-friendly initiative, Samsung also unveiled a new three-year shareholder return program that raises regular annual dividends to 9.8 trillion won for 2021-2023, half of its estimated free cash flow (FCF) for the period. In the past three years, the company paid 9.6 trillion won annually in dividends.

The company said it will make public its annual free cash flow at the end of each year to enhance predictability.

“If a significant amount of expected return is generated, Samsung will actively consider executing a portion of it at the close of each year’s results,” it said in a statement.

MASSIVE INHERITANCE TAX

The enhanced dividend payout has been widely expected, not just for its bid to rebuild shareholder value but also to help Samsung heirs pay their massive inheritance tax bill following the death of the group's patriarch Lee Kun-hee in October.

Samsung Group heirs, including Samsung Electronics Vice Chairman Jay Y. Lee, are required to pay about 11 trillion won in inheritance taxes – the highest amount ever imposed on a Korean company – as Lee Kun-hee was the richest man in the country at the time of his death, with shareholdings valued at around 18 trillion won.

SOLID Q4 ON PANDEMIC-CAUSED DEMAND

Shares of Samsung Electronics were down 2% at 83,900 won in mid-afternoon trading on Thursday, in line with the broader market’s 1.6% fall.

Earlier on Thursday, Samsung posted a 26.4% jump in fourth-quarter net profit to 6.6 trillion won, from 5.22 trillion won in the year-earlier period, as the company continued to ride on sustained demand for its products amid the COVID-19 pandemic. Operating profit rose 26.4% on the year to 9.04 trillion won, while revenue increased 2.8% to 61.55 trillion won.

The results were largely in line with its earnings guidance announced on Jan. 8.

For all of 2020, Samsung posted 26.4 trillion won in net income, up 21.5% from the previous year. Operating profit rose 29.6% to 35.99 trillion won as revenue increased 2.8% to a record 236.8 trillion won.

CHALLENGES AHEAD

Samsung, the world’s largest maker of memory chips and smartphones, expects earnings to decline in the current quarter from the previous three months due to the strong won against the dollar and costs for building new production lines.

But the company said it expects the global memory market to recover by the end of the first half thanks to strong demand from mobile and server applications.

Market demand for smartphones and tablets is expected to decline in the first quarter from the previous quarter amid weak seasonality. However, Samsung said both revenue and profit for its mobile communications business should continue to rise, driven by flagship models and an improved product mix.

Just a couple of weeks ago, the company launched its latest flagship smartphone, the Galaxy S21, at a marked discount from previous years, in a bid to capture market share from the likes of Huawei Technologies Co.

Write to Hyung-Suk Song at click@hankyung.com
In-Soo Nam edited this article.