Samsung Electronics (005930.KS) fell more than 5% during regular trading on the first session after unveiling a large shareholder return plan, dragging down affiliates across the Samsung group. Samsung Life Insurance (032830.KS) and Samsung C&T, both expected to benefit directly from the plan, also weakened.
As of 9:04 a.m. on the 24th, Samsung Electronics traded at 267,000 won, down 14,500 won, or 5.15%, from the previous session, the Korea Exchange said. Preferred shares of Samsung Electronics led the declines with a 7.10% drop, while other affiliates also fell, including Samsung Life Insurance at 4.41%, Samsung C&T at 4.68% and Samsung Electro-Mechanics at 0.46%.
Analysts attribute the moves to heightened short-term supply-and-demand volatility around the announcement. On the 21st, Samsung Electronics unveiled a shareholder return plan of 90 trillion to 110 trillion won ($63 billion to $77 billion) for this year. Because some in the market had expected returns of up to 200 trillion won, the gap between the actual figure and expectations came into focus. Immediately after the announcement, the stock also fell more than 4% from its regular-session close in the Nextrade (NXT) after-market.
Samsung Life Insurance and Samsung C&T are expected to benefit directly from the larger shareholder returns, and brokerages raised their target prices one after another. Yet the shares moved in the opposite direction. Hanwha Investment & Securities raised its target price for Samsung Life Insurance to 363,000 won from 336,000 won, on the view that Samsung Electronics' large dividends and share buybacks could boost Samsung Life's earnings.
SK Securities also raised its target price for Samsung C&T to 550,000 won from 450,000 won. It estimated that if Samsung Electronics pays about 30 trillion won ($21 billion) in third-quarter dividends, Samsung C&T's dividend income from Samsung Electronics would reach 1.7 trillion won ($1.2 billion) for the period from the fourth quarter of last year through the third quarter of this year. Because Samsung C&T has decided to redistribute 60% to 70% of the dividend income from its affiliates to shareholders through 2028, the analysis holds that Samsung Electronics' shareholder returns could flow through to Samsung C&T's shareholders as well.
At the same time, some noted uncertainty over how much of the added earnings will actually reach shareholders. Samsung Life Insurance has presented a "medium- to long-term shareholder return ratio of 50%," but the target date and the path to achieving it have not been specified. "We are raising the target price because of the increase in the value of the Samsung Electronics stake driven by expected higher dividend income, but we have not revised our dividend estimates," said Kim Do-ha, an analyst at Hanwha Investment & Securities. "We plan to adjust them after confirming clear guidance."
Brokerages maintain their view that the large shareholder returns from Samsung Electronics and SK hynix (000660.KS) will support supply and demand in the domestic stock market over the medium to long term. "The large shareholder return plans from market-leading stocks will serve as a safety valve for supply and demand across the domestic market," said Han Ji-young, an analyst at Kiwoom Securities. "Even if volatility in chip stocks rises after the market opens, it will not last long."
