Samsung’s ‘dividend feast’, SK’s ‘treasury share cancellation’…“How long will this party last?” - 경향신문

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Samsung·SK’s record-breaking shareholder returnswhy are the approaches different?

Samsung Electronics Chairman Lee Jae-yong (left) and SK Group Chairman Chey Tae-won shake hands at the ‘National Briefing on the Three Mega Projects for Korea’s Grand Leap Forward’ held at Cheong Wa Dae on June 29. Cheong Wa Dae Photo Pool

Fourteen million retail investors are fixated on the largest-ever shareholder-return packages launched by Samsung Electronics and SK hynix, the bellwethers of Korea’s stock market. Samsung Electronics has finalized a shareholder-return plan worth up to 110 trillion won this year, while SK hynix has resolved to buy on the open market and fully cancel 40 trillion won worth of its own shares. The two semiconductor giants have chosen strikingly different methods and rationales. Samsung Electronics has put ‘cash dividends’ front and center, whereas SK hynix has highlighted ‘treasury share cancellation’. Why the divergence?

Amid expectations for unprecedented shareholder returns, SK hynix and Samsung Electronics, which had been strong last week, both closed lower on the 24th. Samsung Electronics ended the KOSPI session at 257,000 won, down 8.70% from the previous day. Its preferred shares also plunged 8.55%, giving back gains. SK hynix finished at 1,671,000 won, down 3.41%.

In the third quarter alone, Samsung Electronics plans roughly 30 trillion won in cash dividends, combining regular and special payouts. The company has tilted toward ‘dividends over treasury share cancellation’. Behind this lies a tangle of regulation and governance considerations.

At present, Samsung Life Insurance and Samsung Fire & Marine Insurance hold 9.9999% of Samsung Electronics’ common shares. Under the Financial Industry Structure Improvement Act, the cap that can be held without the approval of the Financial Services Commission is 10%, and their holdings sit right below it. If Samsung Electronics were to buy back and cancel a large volume of its common shares, the total number of shares outstanding would shrink and the financial affiliates’ ownership stakes would automatically exceed 10%. To avoid that, the financial affiliates would be forced to sell the excess stake in the market, triggering a chain reaction.

Ultimately, Samsung Electronics chose to maximize ‘cash dividends’ that are deposited directly into shareholders’ accounts, while dispersing share cancellations mainly to preferred shares rather than common stock. This raises the certainty of shareholders’ cash returns while sidestepping governance-related regulatory risk.

By contrast, SK hynix has established a ‘50% rule’to unconditionally return at least half (50%) of the pure surplus cash left after essential investments such as fab expansions and R&D (free cash flow, FCF) to shareholdersand has put front and center a policy of aggressively buying back and cancelling its own shares with those funds.

The 40 trillion won of treasury shares SK hynix has approved amounts to more than about 3.3% of its total shares outstanding. If all of this is retired, the company’s earnings per share (EPS) would immediately rise by roughly 3.4~4% even with the same profits. As the number of shares in circulation permanently declines, the per-share equity value naturally rises, acting as a catalyst that forcefully opens the stock’s upper range.

These choices also deliver concrete benefits at the corporate level. Samsung Electronics has eliminated the risk of violating the Financial Industry Structure Improvement Act, while SK hynix, by reducing shares outstanding through cancellations, will see the stake of its parent SK Square (currently 20.07%) automatically increase, alleviating concerns about meeting the Fair Trade Act’s holding-company requirement (at least 20% ownership of subsidiaries)a two-birds-with-one-stone effect. In addition, by supporting higher share prices, the companies are seen as strengthening future financing capacity and erecting a defensive shield that pre-empts governance attacks by global activist funds.

But there is no shortage of critical views. Though billed as measures ‘for retail investors’, some argue this is in fact a ‘tailor-made calculus’ to shed controlling shareholders’ governance risks and to prepare funding for paying the owner family’s massive inheritance tax in installments.

And because foreign ownership in both companies exceeds 50%, more than half of the returnson the order of 100 trillion woncould flow to overseas institutions and hedge funds, raising a ‘capital outflow’ debate. There are also concerns that the astronomical proceeds companies are generating could weaken the ‘trickle-down effect’ into the domestic industrial ecosystemsuch as nurturing local materials, parts, and equipment partners or supporting research and development (R&D).

“How long will this record-breaking return party last?”

For ordinary investors, the biggest question is how long this extraordinary return party will continue. Experts largely agree the odds are ‘very high’ that this stance will be maintained at least through 2027. The most powerful engine is the massive cash generation from the high-bandwidth memory (HBM) and artificial intelligence (AI) semiconductor supercycle. Despite astronomical capital expenditures, both companies are piling up tens of trillions of won in FCF.

Institutional factors are also at work. Under the amended Commercial Act that took effect in March 2026, listed companies face a deadline of ‘September 2027’ to cancel all treasury shares they had been holding from before the law’s implementation. Treasury share cancellation is not a one-off event but a structural flow intertwined with a legal obligation.

Market professionals note that, just as Apple retired roughly 1,000 trillion won of its own shares over about a decade and lifted its stock tenfold, th latest moves by Korea’s two memory leaders could mark a turning point where an ‘advanced-economy shareholder-return culture that shares the fruits of corporate growth with investors’ takes firm root in the domestic capital market. A brokerage official said, “The opaque cash-hoarding practices that used to be a key driver of the so-called Korea discount are being broken,” adding, “The next two to three years, when the AI boom coincides with the legal cancellation deadline, will be a turning point for Korea’s top two chipmakers to be re-rated to global big-tech levels.”