KCC Surges 24.74% in August on Hopes Samsung Payout Plan Will Lift Dividends

KCC rises 24.74% in August

Holds a 10.49% stake in Samsung C&T

Samsung Electronics special dividend may flow through Samsung C&T

Investor attention is turning to KCC as Samsung Electronics nears a decision on its shareholder return plan. KCC owns a 10.49% stake in Samsung C&T, which has said it plans to return a substantial portion of any special dividend it receives from Samsung Electronics. In its "2026 corporate value enhancement plan," KCC said it would use any special dividend received from Samsung C&T as a source of shareholder returns.

According to the Korea Exchange, KCC rose 9,500 won, or 2.00%, to close the regular session at 484,000 won on August 21. The stock has climbed 24.74% so far this month.

The shares surged 8.46% a day earlier. The rally accelerated around 11:48 a.m. after KCC disclosed a value-up plan stating that it would use more than 50% of any special dividend received from Samsung C&T to fund dividends.

In the filing, KCC said the special dividend would be calculated based on the portion of Samsung C&T's dividend per share above the minimum dividend of 2,500 won. The remaining funds would go toward improving its financial structure, including debt repayment. The company also said it would maintain its existing policy of paying a minimum dividend of 6,000 won per share when standalone operating profit is less than 100 billion won, and an additional dividend equal to 10% of standalone operating profit when that figure is 100 billion won or more.

The focus on KCC has intensified because Samsung Electronics, of which Samsung C&T owns 5.11%, has announced a shareholder return plan of as much as 110 trillion won backed by record free cash flow. That has fueled expectations that a special dividend from Samsung Electronics could pass through Samsung C&T and ultimately reach KCC shareholders. Samsung C&T has also said it plans to return 60% to 70% of dividend income from affiliates from 2026 to 2028.

Hana Securities earlier outlined two dividend scenarios for KCC based on an assumption that Samsung Electronics had about 120 trillion won in remaining shareholder return resources.

Under the most optimistic scenario, with Samsung Electronics allocating 70% of that amount to a special dividend and Samsung C&T returning 70% of it, total DPS would reach 29,131 won, pushing the dividend yield to 6.1%. Under the least optimistic scenario, with a 50% special dividend allocation and a 60% payout ratio at Samsung C&T, KCC's total DPS would come to 21,744 won, made up of a special DPS of 11,664 won and an ordinary dividend of 10,079 won. That would imply a dividend yield of 4.6%.

Applying Hana Securities' framework to Samsung Electronics' estimate of about 110 trillion won in remaining shareholder return resources, KCC's dividend yield this year would work out to about 4.4% to 5.8%.

Alongside the potential dividend increase, the company is also moving ahead with treasury-share cancellations and the monetization of non-core investment assets. KCC is canceling 1,174,300 treasury shares, or 13.2% of shares outstanding excluding stock set aside for employee compensation, in four stages. It completed the first cancellation of 293,575 shares in April and plans to finish canceling all of them by September 2027.

KCC also formalized a policy to sell financial assets held for investment purposes, including Samsung C&T shares, at appropriate times and return part of the gains to shareholders. As of the end of June, the value of KCC's Samsung C&T stake stood at about 7.969 trillion won, while its total financial assets, including HD Hyundai Heavy Industries Holdings, were valued at 9.083 trillion won. The company also set mid- to long-term goals of achieving a price-to-book ratio of at least 1.0 and an operating margin of 10% by 2030.

Brokerages have largely responded positively, citing the more direct link between cash flow from KCC's holdings and shareholder returns.

Lee Jin-myung, a senior analyst at Shinhan Securities, said the key point of the plan was that KCC had formally stated the principle of directly returning cash flow generated by its Samsung C&T stake to shareholders. With the value of KCC's Samsung C&T holdings far exceeding its market capitalization, that stronger link to shareholder returns could ease the holding-company discount and support a revaluation of the assets.

Cho Hyun-ryeol, an analyst at Samsung Securities, said it was encouraging that KCC had laid out a way for investors to share in the gains from those assets during the holding period, given the difficulty of selling all investment assets in the near term. He maintained KCC as his top pick in the sector.

Yoon Jae-sung also highlighted the stock's undervaluation. The current share price implies a price-to-book ratio of 0.38, which he said leaves the stock deeply undervalued given the start of a silicon upcycle and KCC's aggressive shareholder return strategy.

Han Kyung-woo, Hankyung.com reporter case@hankyung.com