Samsung will raise dividends by 40 percent: source

By Kim Yoo-chul

Samsung Electronics will set its per-share dividend for 2014 at 20,000 won ($18.50), up 40 percent from 2013, a source said Sunday.

Its total dividend payout will amount to 3 trillion won ($2.8 billion), compared with 2.16 trillion won the year before. The size of the dividend, however, is about 10 percentage points lower than the firm said earlier this month.

"The announcement is expected Thursday (Jan. 29) during a conference call with analysts and reporters," said the source.

The plan follows confirmation by Samsung’s top investor relations officer Robert Yi of rumors about a stock split; something that was later denied by the firm.

The company also plans to buy back $2 billion worth of its shares ― the first such move in seven years.

Samsung has been under pressure to raise dividends from the government and investors, instead of sitting on a large cash pile.

It had more than $50 billion in reserves as of last year, the largest among Korean conglomerates.

Bernstein Research, a research unit of AllianceBernstein, the biggest asset management firm in the United States, expects its cash hoard to expand to $138 billion by 2017.

Investors are interested in Samsung's efforts to return cash to shareholders as its earnings growth looks to slow to single-digits from 2014, while cash holdings continue to go up.

Samsung's dividend rate, which measures its annual dividend in relation to share price, was just 1.2 percent, less than half of its competitors such as the Taiwan Semiconductor Manufacturing Co. (TSMC) and Intel of the United States.

An official said his company is not likely to make drastic raises to catch up with its competitors, considering it remains ahead of its rivals in key markets.

The planned 40-percent raise in dividends would still keep Samsung well behind overall.

Market analyst agreed it's possible that the consumer electronics giant would put the dividends on a gradual upward path.

"We expect between 1 and 3 percent in buybacks every year for the next three years, in addition to a 1 percent dividend yield, which implies a payout ratio of 15 percent to 30 percent. This would be positive," said Bernstein Research's Mark Newman.

Samsung reported its fourth quarter operating profit would reach 5.2 trillion won, beating the market consensus of 4 trillion won.