Samsung to Boost Shareholder Payouts After Record Earnings

Updated on
  • Quarterly profit tops analyst estimates on chips and displays
  • Samsung seeking new CEO after Kwon said he would resign

Samsung Posts Better-Than-Expected Earnings

Samsung Electronics Co. is putting its record earnings to use with higher payouts to investors and increased investment to capitalize on surging component demand.

The biggest maker of memory chips will double annual dividends to 9.6 trillion won ($8.5 billion) in the next three years with 2017 capital spending to reach 46.2 trillion won. Samsung announced the plans, which didn’t include a detailed buyback proposal, after posting its second straight quarter of record profit.

Samsung has continued to bounce back from scandal thanks to a revived smartphone business and its grip on chip and display components needed by rivals, including screens of Apple Inc.’s marquee iPhone X. The Suwon, South Korea-based company is searching for a new leader with de facto chief Jay Y. Lee in prison for corruption while fellow Vice Chairman Kwon Oh-hyun plans to retire by March.

“Samsung’s plan is line with the expectations of foreign investors who have eagerly sought better dividends,” said Claire Kim, an analyst at Daishin Securities Co. “The overall return to shareholders will remain the same.”

Samsung is setting aside 50 percent of its free cash flow for shareholder returns. After the dividends, the company said it may use any remaining portion of that money for share buybacks “as deemed appropriate.”

Net income rose to 11.04 trillion won in the three months ended September, the company said Tuesday in a filing. That compares with the 10.8 trillion won average of estimates compiled by Bloomberg. Operating profit was 14.5 trillion won on sales of 62 trillion.

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Investments in chips and displays has helped Samsung capitalize on the rally in semiconductor prices and demand from rivals for smartphones using organic light-emitting diodes.

“Samsung’s leading the ‘big cycle’ in memory chips,” Shinhan Investment Corp. said in a report before the earnings, adding it expects the boom to continue next year especially because supply will increase only a little in the first half.

Samsung shares rose 1.9 percent to 2,752,000 won as of 11:09 a.m. in Seoul, putting on pace for a record high close. Earlier buybacks and the growth in semiconductor and display earnings has helped Samsung stock outperform Apple in the past two years.

A surge in global chip prices has helped keep up morale at the company, with its semiconductor division posting operating income for the quarter of 9.96 trillion won.

Contract prices for 32 gigabyte DRAM server modules climbed 7.2 percent in the September quarter from the June period while prices for 128 gigabit MLC NAND flash memory chips rose 4.7 percent in the same period, according to inSpectrum Tech Inc.

Operating profit from the phone business was 3.29 trillion won. Samsung has relied on the Galaxy S8 and Note 8 smartphones to bring back consumer confidence after last year’s Note 7 showed a tendency to explode and led the company to conduct a global recall that cost more than $5 billion. The display business had earnings of 970 billion won.

Capital spending on the chip unit will be 29.5 trillion won this year while the company will invest 14.1 trillion won on the display business.

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Samsung’s consumer electronics unit, which includes TVs and appliances, had profit of 440 billion won, the company said.

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