Amanze Chinonye
Shares of Samsung Electronics fell more than 8% in early trading on Monday after investors reacted negatively to the South Korean technology giant’s record shareholder-return plan, which fell short of expectations for larger share buybacks and greater clarity on capital allocation.
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Samsung said on Friday that it expects to return between 90 trillion won and 110 trillion won ($65 billion-$80 billion) to shareholders in 2026, including 30 trillion won in cash dividends in the third quarter.
Samsung and rival SK Hynix last week announced major shareholder-return programmes as investors pressed the world’s leading memory-chip makers to return more of the profits generated by strong demand for chips used in artificial intelligence applications.
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The planned returns are about five times Samsung’s previous record set in 2020. Analysts said, however, that investors had expected a larger proportion of the funds to be used for share buybacks and cancellations, which can increase the value of remaining shares by reducing the number of shares in circulation.
Samsung said it remains committed to returning 50% of its free cash flow accumulated over the three years through 2026 under its existing shareholder-return policy.
“Unlike SK Hynix, Samsung Electronics did not mention the possibility of raising its existing shareholder-return policy, nor did it announce a plan to cancel treasury shares that could more directly contribute to the stock price increase, which is disappointing,” Sohn In-joon, an analyst at Eugene Securities, said in a report.
SK Hynix said last week it would buy back and cancel 40 trillion won of treasury shares and allocate more than 50% of its free cash flow generated between 2025 and 2027 to shareholder returns.
SK Hynix shares fell 2.5% on Monday, while South Korea’s benchmark KOSPI index fell 3.1%.
Samsung’s ownership structure could constrain the scale of future share buybacks. Large purchases of its own shares could push Samsung Life Insurance and Samsung Fire & Marine Insurance, major Samsung affiliates, above regulatory ownership limits, potentially requiring them to sell shares to keep their combined ownership below 10%.
Kim Soo-hyun, head of research at DS Investment & Securities, estimated that of Samsung’s remaining 60 trillion won to 80 trillion won in planned shareholder returns, about 10 trillion won to 20 trillion won could be used for share buybacks and cancellations, with most of the remainder going to dividends.
Shares of Samsung Life Insurance and Samsung Fire & Marine Insurance fell 9.9% and 8%, respectively.
Samsung said its board would decide on the remaining shareholder payouts in January 2027. The options include cash dividends, share buybacks and share cancellations.
Morgan Stanley described Samsung’s plan as “big capital returns, slightly below expectations” and said investors would focus on the company’s next shareholder-return framework, which is due to take effect next year.
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The market reaction reflects heightened expectations for Samsung and SK Hynix after their shares rose sharply on optimism over the artificial intelligence-driven semiconductor cycle.
Both companies have benefited from strong demand for advanced memory chips used in AI servers. Their shares have since come under pressure as investors reassess the pace of AI-related spending, semiconductor valuations and competition in the global chip market.
For Samsung, the latest market reaction underscores the challenge of balancing shareholder demands with the need to invest heavily in its semiconductor business and maintain its position in the fast-growing AI market.
The company’s January 2027 decision on the remaining shareholder payouts will be closely watched for indications of whether Samsung intends to adopt a more aggressive shareholder-return strategy.
Amanze Chinonye is a Staff Correspondent at Prime Business Africa, a rising star in the literary world, weaving captivating stories that transport readers to the vibrant landscapes of Nigeria and the rest of Africa. With a unique voice that blends with the newspaper's tradition and style, Chinonye's writing is a masterful exploration of the human condition, delving into themes of identity, culture, and social justice. Through her words, Chinonye paints vivid portraits of everyday African life, from the bustling markets of Nigeria's Lagos to the quiet villages of South Africa's countryside . With a keen eye for detail and a deep understanding of the complexities of Nigerian society, Chinonye's writing is both a testament to the country's rich cultural heritage and a powerful call to action for a brighter future. As a writer, Chinonye is a true storyteller, using her dexterity to educate, inspire, and uplift readers around the world.
