Samsung, SK hynix shareholder return policies in focus ahead of Q3 earnings

Shareholder return policies of Samsung Electronics and SK hynix are gaining market attention ahead of their announcements for third-quarter earnings, as investors see them as a key way to address the mismatch between the chipmakers' record-breaking profits and their sluggish share prices.

Samsung Electronics is set to announce its three-month financial results during its earnings call on Thursday, while SK hynix said it will announce its results on its earnings call on Wednesday.

Earnings are expected to be exceptionally strong, as surging demand for memory chips and continued supply bottlenecks have driven up average selling prices across the memory chip market.

In its earnings guidance released Oct. 8, Samsung Electronics estimated third-quarter revenue of 195 trillion won ($146.96 billion) and operating profit of 107.4 trillion won. If realized, the company will become the first Korean company to surpass 100 trillion won in quarterly operating profit.

SK hynix is expected to post 98.23 trillion won in revenue and 76.96 trillion won in operating profit during the same period, according to the consensus of brokerage estimates compiled by market tracker FnGuide. Both figures would mark all-time highs for the company.

Despite the upbeat earnings outlook, neither company's shares have gained upward momentum. Samsung Electronics shares fell 18.2 percent from 261,000 won on Sept. 1 to 213,500 won on Friday, while SK hynix shares declined 25.4 percent from 1,693,000 won to 1,263,000 won over the same period. Compared with their respective 52-week highs, Samsung Electronics shares were down 43.8 percent, while SK hynix shares had plunged 57.9 percent.

Against this backdrop, market attention is turning to how the two chipmakers will use shareholder return policies to buoy their share prices.

In August, Samsung Electronics’ board approved a shareholder return plan worth between 90 trillion won and 110 trillion won for this year, under its existing policy of returning 50 percent of free cash flow (FCF) generated between 2024 and 2026 to shareholders.

Of the total, the company is expected to announce details of approximately 30 trillion won in dividends around the earnings call, including the exact amount and payment date. Samsung plans to determine how to return the remaining amount to shareholders following a board review in January next year, once its 2026 financial results are finalized.

Despite the potential shareholder returns of up to 110 trillion won, the announcement disappointed the market because the company maintained its existing policy of returning 50 percent of FCF without increasing the payout ratio, and there was no mention of additional share buybacks or cancellations.

Samsung Electronics currently faces constraints on canceling large amounts of additional treasury common shares. Under Korean regulations, financial institutions are prohibited from holding more than a combined 10 percent stake in a nonfinancial company.

Samsung Life Insurance and Samsung Fire & Marine Insurance already hold a combined stake approaching that threshold in Samsung Electronics, meaning further cancellations of common shares could push their ownership above the limit, triggering market observers to speculate about the cancellation of the company’s preferred shares.

Also, the company’s existing policy of returning 50 percent of FCF expires this year, raising the possibility that management could drop hints about its policy for 2027 and beyond during the third-quarter earnings call.

SK hynix is also expected to add more clarity to its shareholder return policy during the third-quarter earnings call.

In August, the company pledged to return at least 50 percent of its cumulative FCF generated between 2025 and 2027 to shareholders, saying it will consider special dividends and additional share buybacks and cancellations. The company said that it will disclose further details on the scale and methods of additional shareholder returns during the third-quarter earnings call.

Since August, SK hynix has bought back its treasury shares worth 40 trillion won, and plans to cancel them in the near future. Though the company completed the buyback program about a month ahead of schedule, its shares have remained sluggish, raising expectations that additional shareholder returns could be substantial.

“We expect the company to have at least 30 trillion won in additional funds available for shareholder returns based on its FCF,” Hana Securities analyst Kim Rok-ho said. “We believe share buybacks and cancellations will play a greater role than dividends.”