SK Hynix Jumps 13% After $28.9 Billion Buyback, Lifts Payout Target; Samsung Holders Eye Next Plan

SK Hynix announces 40 trillion won ($28.9 billion) share buyback and retirement

Company also targets returning more than 50% of free cash flow

Brokerages say move signals confidence in earnings durability

Samsung Electronics special dividend may exceed 100 trillion won ($72.3 billion)

SK Hynix Inc. surged more than 10% on Aug. 20 after announcing a record shareholder return plan. Brokerages in South Korea and overseas welcomed the move, saying it signaled confidence in the durability of earnings. Investor focus is now shifting to Samsung Electronics Co., which is preparing to unveil its own shareholder return policy.

According to the Korea Exchange, SK Hynix closed at 1.691 million won on Aug. 20, up 191,000 won, or 12.73%, from the previous session. The stock briefly reclaimed the 1.7 million won level during intraday trading. Foreign investors led the rally, buying a net 539.3 billion won ($390 million) of the shares.

Investor sentiment improved after US Treasury yields, which had weighed on confidence in the staying power of Big Tech's artificial intelligence spending, showed signs of easing. Momentum strengthened further after SK Hynix unveiled an unprecedented shareholder return package. The company said on Aug. 19 that it would buy back 40 trillion won ($28.9 billion) of its own shares and retire the full amount. The repurchase period runs from Aug. 20 to Nov. 19.

The plan marks the largest treasury-share retirement by a South Korean listed company. Based on the Aug. 19 closing price of 1.5 million won, SK Hynix could repurchase about 3.6% of its outstanding shares. Retiring all of those shares would raise earnings per share by about 3.8%, according to market estimates. Investors also focused on the company's decision to raise its shareholder return target for cumulative 2025-2027 free cash flow to more than 50%, from the previous cap of 50%.

Brokerages broadly praised the announcement. Park Jun-young, an analyst at Hanwha Investment & Securities, said the company moved early on a large shareholder return plan even though free cash flow for this year and next year has not been finalized. That reflects confidence in future cash generation and in meeting financial stability goals, he said. With the 50% threshold effectively shifting from a ceiling to a floor, actual shareholder returns could exceed 245 trillion won ($177.2 billion), Park added.

The move also helped ease skepticism over whether memory-chip makers can sustain profits through an AI-driven supercycle. Lee Jong-wook, an analyst at Samsung Securities, said the market has moved beyond earnings surprises and into a phase focused on profit durability. In that environment, shareholder returns are a necessary event, he said. The policy should help limit downside in the stock while highlighting further upside.

Barclays also called the buyback a "strong signal" in an Aug. 20 report and said the shares are undervalued at current levels. Simon Coles, an analyst at Barclays, wrote that SK Hynix should be able to return about 15% of its market capitalization to shareholders while still meaningfully expanding production capacity over the next few years and investing in new opportunities. Barclays viewed the company's ability to increase shareholder returns without cutting capital spending positively.

Attention is now turning to Samsung Electronics ahead of its own shareholder return announcement. After Japan's Kioxia Holdings Corp., US NAND flash maker Sandisk Corp. and now SK Hynix moved to boost payouts, expectations are building that Samsung will follow.

According to industry officials, Samsung Electronics plans to unveil a shareholder return package of about 150 trillion won ($108.4 billion) this month. That would mark the biggest such plan in the history of South Korean listed companies. Samsung's board is set to vote this month on measures centered on share buybacks and a special dividend. This year's total payout is known to be around 150 trillion won. Some investors had speculated the figure could reach 200 trillion won ($144.5 billion), but the final plan is expected to adhere to the principle of returning 50% of free cash flow to shareholders.

Kim Dong-won, head of research at KB Securities, said Samsung Electronics' policy of returning 50% of cumulative 2024-2026 free cash flow implies a special dividend of at least 100 trillion won ($72.3 billion). He added that large shareholder returns would be a powerful catalyst not only for Samsung's corporate value, but also for a re-rating of valuations across South Korea's main stock market.

Go Jeong-sam, Hankyung.com reporter jsk@hankyung.com