Samsung Electronics will increase the dividend and will consider options for changing its structure
Samsung Electronics Co. announced that the dividend increase and consider options for the conversion of its structure in response to the growing demand for management reform.
As I stated in the Samsung Tuesday, the world leader in smartphones, in the long term it intends to distribute to shareholders all cash in excess of 70 trillion Korean Won (59.8 billion US dollars). At the end of September, the amount of available funds for Samsung, net debt slightly exceeded 70 trillion won. In addition, the company has promised to appoint a new independent board of directors with experience in the international market.
Samsung is still trying to recover from the forced large-scale withdrawal of smartphones, which has already cost her more than $ 5 billion and deteriorated its outlook for full-year profit.
Two weeks earlier, Samsung spent $ 8 billion in cash for the acquisition of Harman International Industries Inc. in search of new growth areas in the field of automotive technology.
Samsung CFO Lee Sang-Hoon, speaking Tuesday before the analysts said the company needs cash reserves, in particular, to finance transactions such as Harman absorption.
Investors, especially foreign organizations for years demanded by Samsung to change the policy, including the part with growing cash reserves, to transform the structure and create a multidisciplinary board of directors.
American activist fund Elliott Management Corp., which last year almost tore the merger of two subsidiaries of Samsung, in October called on Samsung Electronics to split into two parts and to pay shareholders a one-time dividend of about 30 trillion won. Elliott also claimed Samsung's promise to pay annually to shareholders not less than 75% of the profits minus capital expenditures.
Samsung new proposals do not meet the requirements of Elliott, but the conglomerate can help buy time amid continuing calls for investors and governments to simplify the complicated ownership structure. Samsung empire consists of 58 subsidiaries with cross-ownership.
Elliott representative did not respond to a request for comment.
According to Samsung, it considers "the possibility of creating a holding structure"And also plans to list on another international exchange. However, the company warned that the process will take at least six months and as long as it is not aimed at any particular outcome.
Samsung also plans to hire a new director with experience in the international market in order to diversify the board of directors, which currently consists of nine men, representatives of South Korea. It is planned to organize a new Management Committee composed entirely of independent members of the Board of Directors to replace the existing committees on corporate social responsibility.
In regard to the remuneration of shareholders, the Samsung intends this year and next year to pay half of the profit after deduction of capital expenditure, whereas last year announced its intention to pay between 30% and 50% of this amount. The dividend will be paid quarterly rather than twice a year from next year, as before, and made this year's 4 trillion won, up 30% exceeds the volume of the previous year.
In 2013, when the shareholders have just begun to demand an increase of payments, the Samsung spent on dividends and share buybacks only 7.2% of net profit compared to 40% in 2007. Since the payout ratio has increased to about 20%, but Samsung is still far behind companies such as Apple Inc. and Qualcomm Inc., which paid to shareholders of 70 percent or more of their money.
Samsung shares showed a neutral dynamics in the middle of trading on Tuesday and held about 1% below its historical peak.
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