Samsung Could Follow Apple’s Stock Path if It Becomes a High-Dividend Play, Hana Says

Samsung Electronics Co.’s shares could trace a path similar to Apple Inc.’s if the company expands shareholder returns enough to win a high-dividend-stock valuation over the medium to long term, Hana Securities said.

The view rests on Samsung’s ample free cash flow and the potential for more aggressive shareholder returns. In an Aug. 18 report titled “What Will Foreign Investors Buy?”, Hana Securities analyst Lee Jae-man wrote that market expectations are growing that Samsung could shift from a high-growth stock to a high-dividend play.

Apple’s transformation offers clues to the route Samsung would need to take to lead the market, Lee wrote.

Apple first became the world’s most valuable company after a burst of earnings growth from 2010 to 2012. Net income growth exceeded 70% during that period, and the stock jumped 110% over three years. The S&P 500 rose about 23% over the same stretch.

From 2013 to 2016, as earnings growth slowed, Apple ramped up dividends and share buybacks. Its shareholder return ratio relative to free cash flow averaged 64%. During that transition from growth stock to dividend stock, Apple’s cumulative return was 48.5%, roughly in line with the S&P 500’s 52.5% gain, according to Lee.

From 2019 to 2021, Apple reestablished itself as a market leader after firmly cementing its image as a high-dividend stock. Its shareholder return ratio relative to free cash flow averaged 121% in that period. The stock surged 200.7%, far outpacing the S&P 500’s 73.5% rise.

Hana Securities said Samsung could follow a similar pattern. Samsung’s projected dividend payout ratio is 16% in 2026 and 9% in 2027. That is still lower than global big tech companies viewed as high-dividend stocks, including Apple at 12%, Microsoft at 18% to 20% and TSMC at 23% to 25%.

Lee wrote that Samsung is likely to maintain earnings growth through 2027, though the growth rate itself could slow from 2026. The key issue, he said, is not the pace of growth but how the company returns its rapidly accumulating free cash flow to shareholders.

Samsung can only expect the kind of powerful rerating and market leadership Apple once achieved if it sharply strengthens shareholder return policies and establishes itself as a global tech high-dividend stock, backed by surging free cash flow, Lee wrote.

For now, Samsung may struggle to outperform the Kospi by a wide margin, Lee said. Based on Apple’s past transition, Samsung could remain a stock that broadly tracks index returns until the market is convinced of a clear shift to a high-dividend profile. Samsung’s shareholder return ratio relative to free cash flow is currently about 50% for 2024 through 2026.

The immediate priority is to recover from an overly depressed valuation and reduced foreign ownership while moving in line with the Kospi. Samsung’s valuation discount has widened excessively, and foreign ownership has fallen to its lowest level since 2010, leaving the stock well placed to lead a short-term rebound in the benchmark index, Lee wrote.

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