South Korean technology giant Samsung electronics Co Ltd (005930.KS) promised to return $26 billion to shareholders over the next 3 years because it reported record third-quarter profit on the back of the worldwide boom in memory chips.
The world’s biggest maker of semiconductors, televisions and smartphones aforesaid it’d double dividends next year to 9.6 trillion won and keep them at that level until 2020, because it responds to investor pressure to share its vast money reserves and catch up with some of its more generous peers.
It also said 2017 capital expenditure would be its biggest ever, climbing 81 % to 46.2 trillion won ($41 billion) as it builds new chip factories and clean-rooms to stay ahead of demand for servers and devices with ever bigger memory.
“The current record earnings are born out of such huge investments within the past, and therefore the outsized capex is a sign that Samsung will continue investing for future results,” said Greg Roh, analyst at HMC Investment & Securities.
“Next year’s capex could be similar for Samsung to keep this momentum.”
Operating profit nearly tripled within the third quarter from the same period a year earlier, to 14.5 trillion won ($12.91 billion), Samsung said in a regulatory filing, matching its earlier estimate.
Revenue jumped 29.8 % to 62 trillion won, also in line with its earlier estimate
The investor return policy for the next 3 years ramped up guidance to a level above its current range of 30-50 % of free cash flow to 50 % over 3 years.
Samsung’s holdings of money and cash equivalent stood at seventy six trillion won at the end of Sep, eight p.c higher than the previous quarter thanks largely to strong earnings that have over paid for massive capital expenditure.
While the dividend policy builds on the investor-friendly trend Samsung started in 2015, it absolutely was not as generous as some investors had hoped, analysts said.
Apple inc (AAPL.O) has paid nearly twenty two cents for each dollar it earned over the past 5 years, while Microsoft corp (MSFT.O) has shared fifty three cents. meanwhile Samsung has paid simply eleven cents, according to Reuters data.
South Korean family-run business empires like Samsung group have a reputation for low dividend payouts and other governance practices that favor controlling shareholders at the expense of normal investors.
In a bid to change that perception, Samsung electronics is one of about seventy listed companies that has promised to adhere to a governance code adopted by the Korea stock exchange this year.
Its shares were up 1.3 percent, while the Kospi benchmark share price index .KS11 rose 0.4 percent. The stock has risen 67 % over the past twelve months.
Samsung said the earnings outlook was positive thanks mainly to the chip business, with conditions in this market likely to “remain favourable” in 2018. It also forecast greater sales of flexible OLED screens used in smartphones.
The chip business was Samsung’s prime earner within the third quarter because it booked a record ten trillion won operating profit, from 3.4 trillion won from the previous corresponding period.
Profits from mobile devices jumped to 3.3 trillion won compared with simply 100 billion won at the same time last year, when the company booked the costs of the withdrawal of its fire-prone Note seven gadget.
The record earnings come amid ongoing management upheaval at the company following the arrest of group heir apparent Jay Y. Lee on bribery charges.
CEO and vice chairman Kwon Oh-hyun declared on October. thirteen that he planned to step down from management, leaving several key roles vacant including head of the components business.