Samsung Electronics Preferred Soars on Growing Dividend Expectations, Hits Consecutive Record Highs

Foreign Buyers Push Prices to New Highs for Four Consecutive Days... Increased Appeal of Additional Dividends

[Asia Economy Reporter Song Hwajeong] Samsung Electronics preferred shares are continuously hitting new record highs. This is interpreted as being driven by expectations of increased dividends due to Samsung Group's inheritance tax.

As of 10:02 AM on the 12th, Samsung Electronics Preferred (Samsung Jeonja Woo) rose 0.70% (400 KRW) from the previous day to 57,300 KRW. This is a 52-week high, and Samsung Jeonja Woo has maintained a four-day streak of record highs since the 9th. Having risen for five consecutive days until the previous day, Samsung Jeonja Woo has increased by 13.57% this month, outperforming Samsung Electronics, which rose 8.3% during the same period.

In particular, foreign investors' buying momentum has driven up the price of Samsung Jeonja Woo. This month, foreign investors have net purchased Samsung Electronics shares worth 889.8 billion KRW, making it the largest net purchase, and they also net purchased 180 billion KRW of Samsung Jeonja Woo, ranking fifth in net purchases. They recorded five consecutive days of net buying until the previous day.

The recent change in the sluggish price trend of Samsung Jeonja Woo this year appears to be due to dividend expectations. As the year-end approaches, preferred shares tend to show strength due to dividend expectations, and recently, expectations for increased dividends have grown further due to Samsung Group's inheritance tax issues. Preferred shares do not have voting rights but offer higher dividend yields than common shares.

Kim Seonwoo, a researcher at Meritz Securities, said, "We expect a favorable trend for Samsung Electronics preferred shares, showing higher attractiveness compared to common shares," adding, "This is because potential future dividend policies will favor preferred shares from the perspective of dividend yield." Samsung Jeonja Woo pays an additional 1% of the face value as dividends, so the actual dividend difference is minimal, but due to the lower stock price, it results in a higher dividend yield than common shares.

In particular, a strong shareholder return policy by Samsung Electronics is expected to secure substantial funds for inheritance tax payments. Researcher Kim explained, "Starting with a special year-end shareholder return, a strong shareholder return policy for related parties and all shareholders is expected," adding, "The special year-end shareholder return fund is expected to be 7.4 trillion KRW, and from next year onwards, an additional strengthening of the existing dividend policy of 50% of free cash flow (FCF) is anticipated."

Kim Dongyang, a researcher at NH Investment & Securities, said, "The inheritance tax burden on Chairman Lee Kun-hee's affiliated company shares worth 18.2 trillion KRW is 10.6 trillion KRW, and the controlling shareholder family's shares will be concentrated in Samsung Electronics and Samsung C&T in terms of dividend income and maintaining Samsung Group's control," adding, "Any shortfall in funds from disposing of other shares will be secured through strengthening Samsung Electronics' dividend policy."