Samsung Electronics on October 29 unveiled a 11.3 trillion won (US$ 10 billion) share buyback, a move that many believe came as the tech giant thought that its shares were "extremely underestimated" compared to the company's actual value. To return more of its profits to shareholders, Samsung Electronics has decided to give shareholders 30 percent to 50 percent of its free cash flow annually, primarily through dividends.
Free cash flow (FCF), a measure of how much cash a business generates after accounting for capital expenditures, is calculated as: NOPAT (net operating profit after tax) + Depreciation & Amortization - Change in Net Working Capital - Capital Expenditure.
Samsung Electronics said it would buy back 11.3 trillion won worth of its own shares and cancel all of the shares to be purchased through the buyback. “Though the biggest–ever buyback plan, we look to greatly enhance shareholder value,” said Samsung Electronics.
Samsung Electronics also said that its annual dividend payout for 2015 will be announced after the company’s board meeting, scheduled for January 2016. Earlier this year, Samsung Electronics paid an end-2014 dividend of 19,500 won per common share, up 41 percent from the end-2013 dividend of 13,800 won per share. Samsung Electronics also said that it was considering the introduction of a quarterly dividend payout system.
“We’ve invested over USD 20 billion in facilities and over USD 12 billion in research and development projects every year in order to hold technological leadership and keep our financial structure stable. We’ve put our heads together to spend cash in a way that can enhance both our value and shareholder value in the long term,” Samsung Electronics explained.
In a conference call, Kim Sang-hyo, Vice President of Investor Relations (IR) at Samsung Electronics, said that “Samsung Electronics is not considering merging with Samsung SDS.”
