[E-Daily Reporter Kim Kyung-eun ] SamsungElectronics(005930)There are forecasts that the significant expansion of shareholder returns at SamsungElectronics could lead to an increase in dividends across the entire KOSPI market, extending beyond its affiliates such as Samsung Life Insurance(032830),SamsungFire&MarineInsurance(000810),SAMSUNG C&T CORPORATION(028260), andKCC Corporation(002380). Analysts suggest that if SamsungElectronics’ cash dividends this year reach up to 110 trillion won, the total dividend payout for KOSPI common stocks could increase by up to 60% compared to current projections.

Kim Joong-won, an analyst at HYUNDAI MOTOR SECURITIES, stated in a report on the 23rd, “We expect a dividend trickle-down effect from SamsungElectronics’ increased dividends to spread through Samsung Life Insurance, SamsungFire&MarineInsurance, and SAMSUNG C&T CORPORATION, all the way to KCC Corporation.”

At a board meeting on the 21st of last month, SamsungElectronics proposed a total shareholder return of 90 trillion to 110 trillion won for this year. This aligns with the company’s existing policy of returning 50% of cumulative free cash flow (FCF) from 2024 to 2026 and represents a record high—approximately five times the level of shareholder returns in 2020. SamsungElectronics plans to pay a cash dividend of approximately 30 trillion won in the third quarter, with the exact amount to be finalized by the end of October. The method and scale of the remaining 52.65 trillion to 72.65 trillion won in shareholder returns will be determined in January of next year.

The key issue is how much of the remaining shareholder return funds will be allocated to cash dividends. Samsung Life Insurance and SamsungFire&MarineInsurance hold 8.51% and 1.49% of SamsungElectronics’ common stock, respectively, for a combined stake of approximately 10%. If SamsungElectronics conducts a large-scale buyback and cancellation of its common stock, the number of outstanding shares will decrease, potentially increasing the ownership stakes of these two financial affiliates and creating pressure to adjust their shareholdings. HYUNDAI MOTOR SECURITIES analyzed that, for this reason, the proportion of cash dividends within the remaining shareholder return funds is likely to increase.

HYUNDAI MOTOR SECURITIES assumed total shareholder returns for SamsungElectronics of 90 trillion won, 100 trillion won, and 110 trillion won, respectively, and estimated cash dividends at 70 trillion won, 90 trillion won, and 110 trillion won. The scale of share buybacks and cancellations was set at 20 trillion won, 10 trillion won, and 0 won, respectively. As a result, the estimated size of the additional special dividends based on the financial results is projected to range from 32.65 trillion won to a maximum of 72.65 trillion won.

Samsung Electronics’ increased dividends are expected to trickle down to its affiliates. Samsung Life Insurance, SamsungFire&MarineInsurance, and SAMSUNG C&T CORPORATION—which hold stakes in SamsungElectronics—will see their dividend income rise in proportion to their holdings as cash dividends increase. Although KCC Corporation does not directly hold SamsungElectronics shares, it owns a 10.49% stake in SAMSUNG C&T CORPORATION; therefore, it stands to benefit indirectly if SAMSUNG C&T CORPORATION redistributes its increased dividend income to its own shareholders.

However, affiliated companies do not necessarily return all dividends received from SamsungElectronics to their shareholders. While Samsung Life Insurance and SamsungFire&MarineInsurance determine dividends based on net income and the total shareholder return ratio, SAMSUNG C&T CORPORATION has a policy of redistributing 60–70% of its dividend income from affiliated companies. KCC Corporation also allocates more than 50% of the special dividends it receives from SAMSUNG C&T CORPORATION toward its own special dividend fund. Accordingly, HYUNDAI MOTOR SECURITIES forecasts that the dividend trickle-down effect will be relatively significant at SAMSUNG C&T CORPORATION and KCC Corporation.

Analysts estimate that if SamsungElectronics’ dividend increase materializes, it will have a significant impact on the overall dividend volume of the KOSPI. The market currently expects this year’s KOSPI common stock dividends to total 97.3 trillion won. Assuming SamsungElectronics’ cash dividends range from 70 trillion to 110 trillion won, common stock dividends for SamsungElectronics would increase by 17.34 trillion to 52.74 trillion won compared to previous forecasts. The increase in redistributed dividends from four affiliated companies—Samsung Life Insurance, SamsungFire&MarineInsurance, SAMSUNG C&T CORPORATION, and KCC Corporation—is estimated to range from 1.52 trillion to 5.69 trillion won.

Taking all of this into account, the total dividend payout for KOSPI common stocks is projected to range from 116.16 trillion to 155.73 trillion won, representing an increase of 19.4% to 60.0% compared to current forecasts. The KOSPI dividend yield is also estimated to rise from the currently projected 1.7% to between 2.08% and 2.79%.

SamsungElectronics’ own dividend appeal is also set to rise. If the cash dividend total ranges from 70 trillion to 110 trillion won, the estimated dividend per share (DPS) is projected to be between 10,660 and 16,752 won. Based on the stock price as of the 21st, the dividend yield for common shares is 3.9–6.1%, while that for preferred shares is 5.1–8.1%. Since the same DPS applies, the dividend yield for preferred shares—which have a lower stock price—is higher.

The dividend trickle-down effect will not materialize all at once. Following SamsungElectronics’ cash dividend, Samsung Life Insurance, SamsungFire&MarineInsurance, and SAMSUNG C&T CORPORATION are expected to sequentially redistribute additional earnings through year-end dividends this year and dividends starting next year. It is explained that for KCC Corporation, which operates through SAMSUNG C&T CORPORATION, the timing of this effect may be delayed by one step.