Samsung share price up, set to double dividend payout

Samsung Electronics announced on Friday it plans to boost its full-year dividend payout by 30% to 50%, as an answer to investors calls for higher returns.

The move comes after last months announcement that the South Korean company would buy back $2 billion worth of shares as a part of its restructuring program.

The decision to raise dividends still needs to be approved by the companys shareholders and its board of directors, which will discuss the possibility in late January. Last year Samsungs dividend stood at $13 per share, or 7.2% of its profit versus the 40% in 2007. The value of the dividends was also lagging behind rivals Intel and Apple.

Samsungs dividend yield, a measure which puts a companys annual dividend against its share price, is around 1.2% nearly twice smaller compared to companies like Intel and Taiwan Semiconductor Manufacturing.

Shareholders have been pressing for higher returns as a compensation for falling share price. The company also has around $60 billion of gross cash under its belt, with many investors sharing the opinion that Samsung does not need to pile up so much money. However, executives have argued that the funds are needed by Samsung in order to stay competitive.

Samsung is set to report its worst annual performance in three years as the company faces severe pressure from both high-end competitors like Apple and low-cost Chinese companies like Huawei, Lenovo and Xiaomi.

Samsung reported a 49% decline in net profit for the third quarter and although the company is still the biggest smartphone vendor, its market share has decreased. According to Strategy Analytics, Samsung accounted for 24.7% of the smartphone market in the third quarter, down from the 35% it held a year earlier.

At the beginning of the year, Samsung pledged to significantly boost its dividend, although, the company did not change its interim dividend in July. However, with its latest decision Samsung renewed its promise to improve shareholder value. The company also cited criticism from South Korea’s finance minister and stock-exchange operator, saying that major companies are stacking up cash which would be better utilized if returned to shareholders, as another decision driver.

Samsung Electronics Co Ltd gained 4.90% on Friday and closed at ₩1 328 000, marking a year-to-date decrease of 3.21%. The company is valued at ₩208.38 trillion. According to the Wall Street Journal, the 34 analysts rate the stock at “buy” with estimated prices at : high – ₩1,700,000, median – ₩1,500,000 and low – ₩1,050,000.