Samsung doesn’t want to give investors $500 million in dividends

Activist investors who own about 1.46% of Samsung C&T, the de facto holding company of Samsung Electronics, are calling on the company to increase shareholder returns by announcing a higher dividend and initiating share buybacks. They’ve proposed a plan that amounts of 1.2 trillion won or $900 million for both actions.

Samsung C&T has submitted the proposal from these investors, which includes the City of London Investment Management, for a vote by shareholders at the upcoming meeting on March 15. However, it doesn’t agree with the proposal and highlights cashflow concerns as a factor.

Samsung C&T is worried about paying out a big chunk of cash

The five activist investors want Samsung C&T to increase its dividend payout to 4,500 ($3.3) won for each common and 4,550 ($3.41) won for each preferred share. The total dividend amount would thus be over $500 million.

The proposed amount is over 70% of what Samsung C&T wants to give, which is 2,550 ($1.9) won for common and 2,600 ($2) won for preferred shares. These investors also want the company to initiative a share buyback worth 500 billion won, roughly $375 million.

While it’s not in line with what the activist investors want, Samsung’s proposed dividend is still 10.9% higher than the previous year and it also represents 49% of the company’s total surplus cash flow. Samsung says that the combined value of the dividend and share buyback proposed by these investors exceeds Samsung C&T’s surplus cash projection for not just 2023 but also 2024.

“If such a substantial cash outflow occurs, the company will encounter difficulties in securing internal investment resources for future growth and strengthening its competitive edge,” Samsung C&T said in a regulatory filing. Highlighting the concerns about the outflow of such a large amount of cash, Samsung C&T has called upon shareholders to reject the proposal.

It remains to be seen how shareholders vote at the meeting next month. The activist investors’ proposals come amid a renewed push by the South Korean government to increase the valuations of local conglomerates, which has for long traded at a discount to their peers across the globe.