Samsung, SK Hynix Investors Push for Bigger Dividends and Buybacks
Synopsis
Investors are urging Samsung and SK Hynix to return more cash through dividends and buybacks after strong AI-driven profits. Both companies say they are reviewing their shareholder return plans.
Record earnings, fueled by increasing demand for AI chips have created increasing pressure on Samsung and SK Hynix from investors to enhance shareholder returns through bigger dividends and buybacks,
By the end of this year, the world’s two largest memory chip manufacturers are expected to hold a combined US$263 billion in net cash. According to Reuters calculations based on LSEG data, that’s more than twice Nvidia’s estimated US$102 billion in net cash and exceeds the combined cash holdings of the other six “Magnificent Seven” technology companies.
Despite their strong financial performance, both companies offered limited details about future capital return plans when announcing their latest earnings.
Investors Push for Bigger Shareholder Returns
Samsung and SK Hynix currently return around 50% of their free cash flow to shareholders. By comparison, US memory chip maker Micron announced in June that it intends to return 100% of its free cash flow.
Richard Clode, a portfolio manager at Janus Henderson Investors, said maintaining payouts at roughly 50% could leave both companies sitting on more cash than they realistically need.
He added that avoiding a stronger long-term commitment to shareholder returns could reinforce concerns among investors that today’s AI-driven earnings boom may not be sustainable.
In a conference call with analysts last week, SK Hynix called the program low-leverage and said it is weighing more steps to boost shareholder returns, plans that will be unveiled later this year.
Samsung also told investors it is assessing its shareholder return initiative and promised more information soon. The company said it is continuing to prioritise a strong balance sheet as it considers actions to provide more value for shareholders.
Pressure Builds for Larger Share Buybacks
Some investors are now pushing for more decisive action. Retail investor platform ACT has launched a campaign urging Samsung to hold an extraordinary shareholder meeting and approve a US$32 billion share buyback.
ACT representative Lee Sang-mok said many retail investors have become increasingly concerned following the recent decline in Samsung’s share price. Samsung’s market value went down about 37% and SK Hynix’s shares lost nearly 48% from their record highs in June.
Both firms also announced plans to invest a total of 3,200 trillion won (US$2.07 trillion) in the country this year to expand production capacity and support growing AI-related demand.
Analysts say long-term supply agreements with major customers should allow both companies to continue investing heavily while still providing room to increase shareholder returns.
Many investors also believe stronger capital allocation and more generous payouts could help narrow the long-standing Korea discount, where South Korean companies often trade at lower valuations than many global peers because of relatively weaker returns to shareholders.
Source: Reuters
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