LS Securities on the 27th projected that Samsung Life Insurance(032830)'s dividend funding will increase significantly thanks to Samsung Electronics' large-scale shareholder return plan. Accordingly, it maintained a "buy (BUY)" recommendation and raised the target price to 420,000 won from 380,000 won. The previous trading day's closing price of Samsung Life Insurance was 309,500 won.
Jeon Bae-seung, an LS Securities researcher, said, "Samsung Electronics' shareholder return announcement has heightened the visibility of Samsung Life Insurance's dividends," and "Expectations for greater clarity on shareholder return policies, including treasury share policy, will continue to strengthen."
Samsung Electronics presented this year's shareholder return size at 90 trillion to 110 trillion won. Samsung Electronics will use 30 trillion won for a cash dividend in the third quarter this year and plans to allocate the remaining funds early next year between dividends and share repurchases and cancellations.
Samsung Electronics' large-scale shareholder return is expected to simultaneously boost the profits and dividend funding of major shareholder Samsung Life Insurance. Researcher Jeon analyzed, "Samsung Life Insurance will recognize an increase in net income from Samsung Electronics' large dividends this year and next year, as well as gains on the sale of Samsung Electronics equity to maintain its ownership stake."
In particular, it was estimated that Samsung Life Insurance's investment gains will increase by about 2.06 trillion won and net income by about 1.66 trillion won thanks to Samsung Electronics' special dividend in the third quarter this year. In addition, the 882.8 billion won gain on the sale of Samsung Electronics equity in March is included in the dividend funding.
Jeon analyzed that if last year's payout ratio of 41.3% is simply applied, Samsung Life Insurance's dividend per share (DPS) for this year would be calculated at over 10,000 won.
However, the actual dividend size could be lower than that. Jeon expected, "Given that Samsung Life Insurance has maintained a steady and stable upward trend in DPS, and considering the need to secure growth resources, the burden of accumulating surrender reserves, K-ICS (risk-based capital ratio) management, and policyholder dividends, a relatively lower payout ratio will be applied to one-off or additional funds that exceed recurring earnings."
Dividend capacity is expected to expand further next year. LS Securities estimated that if Samsung Electronics carries out an additional 70 trillion won shareholder return early next year, Samsung Life Insurance's additional dividend funding would reach 4.5 trillion won.
Jeon said, "Even if more than 10% of the additional funds are paid out as dividends, DPS could exceed 10,000 won," and "As in 2018–2019, there is also a possibility of distributing large additional funds over two to three years."
Samsung Electronics' method of shareholder returns is also expected to affect Samsung Life Insurance's dividend funding. The more Samsung Electronics raises the share of cash dividends relative to share repurchases and cancellations, the more dividend funding Samsung Life Insurance can secure.