The semiconductor sector has once again revitalized a sluggish stock market. Samsung Electronics and SK Hynix are set to distribute a combined 200 trillion won in shareholder dividends this year, leading to a significant rebound in the KOSPI index. The anticipated cash dividends for the third quarter alone amount to 20 trillion won, with Samsung planning to pay 5,000 won per share and SK Hynix 20,000 won per share. Following this announcement, shares of Samsung Electronics rose by 9.01% and SK Hynix by 10.89% on October 28.
However, investor perspectives on this unprecedented dividend are mixed. While some view it as a much-needed relief in a market struggling to find positive news, others criticize it as a potential detriment to the companies' future growth.
Semiconductor Giants Usher in Era of 100 Trillion Won Dividends
On the same day, SK Hynix's stock surged after announcing a total of 30 trillion won in shareholder returns for the third quarter, which includes 14 trillion won in cash dividends and 20 trillion won in stock buybacks. This marked a remarkable increase of 10.89%. Foreign investors also showed renewed interest, with net purchases reaching 385.9 billion won, the highest in 24 trading days since September 18. With this announcement, SK Hynix's total dividend for the year is projected to reach 100 trillion won, combining with the 40 trillion won in stock buybacks completed in the first half of the year. This figure is approximately seven times higher than last year's shareholder return of 14.3 trillion won.
Samsung Electronics is expected to unveil an additional cash dividend plan of 30 trillion won during its third-quarter earnings conference on the 29th. When combined with the 20 trillion won dividend already distributed in the first half, the total shareholder dividends for the year are estimated to exceed 100 trillion won, significantly surpassing the previous record of 20.3 trillion won set in 2020.
The aggressive shareholder return strategies from both companies aim to appease small shareholders. Despite reporting record earnings in the third quarter, both Samsung and SK Hynix have seen their stock prices decline amid concerns over the so-called 'AI bubble.' Samsung's stock fell from a peak of 369,500 won on June 26 to 202,000 won on October 19, a drop of 46% in about four months. Similarly, SK Hynix's stock plummeted by 61%, from a high of 3,002,000 won on June 23 to 1,171,000 won on October 23, amid controversies regarding the dual listing of its subsidiary Solidigm.
“Actions That Undermine Future Competitiveness”
Reactions among shareholders regarding the 200 trillion won dividend policy are divided. Proponents argue that high dividends could alleviate the 'Korea discount' and attract long-term global institutional investors. One Samsung shareholder in their 50s stated, “Given the volatility of semiconductor stocks, dividends should accompany the stability provided by these companies. Our shareholder returns are still lacking compared to global tech giants.” In contrast, companies like Micron in the U.S. return 100% of excess cash to shareholders, while Apple and Qualcomm also benefit from high dividends that enhance their valuation premiums.
On the other hand, critics warn that excessive dividends could erode the companies' future competitiveness. A shareholder in their 40s from SK Hynix remarked, “The semiconductor industry is cyclical and must prepare for downturns. It is crucial to maintain core competitiveness against China's advances and U.S. restrictions. I question whether special dividends, especially those related to Kioxia profits, are beneficial for shareholders in the long run.” Both Samsung and SK Hynix are investing astronomical amounts in domestic and international infrastructure, including the establishment of a 800 trillion won semiconductor cluster in Honam.
Balancing technological competitiveness with shareholder value remains a challenging task not only in South Korea but also in the U.S. The principles of Berkshire Hathaway, led by Warren Buffett, are noteworthy in this context. Buffett is famously known for not issuing dividends since the company's founding, except for one instance in 1967. In a 2012 letter to shareholders, he stated, “The returns generated by reinvesting retained earnings are far superior and more valuable than what shareholders could achieve by investing that money themselves.”
A securities firm representative commented, “Companies face significant challenges in finding a reasonable distribution method that allows them to return cash to shareholders while maintaining their technological competitiveness.”
* This article has been translated by AI.
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