Samsung Electronics started executing its $8 billion share buyback plan on Wednesday after the company's Board of Directors approved of the decision the day before, South Korean outlets report. The first phase of the plan will last until late April. During the next three months, the Seoul-based tech giant will repurchase 1.02 million of common shares and approximately 255,000 of its preferred shares. Once they're bought back, all reacquired shares will be canceled in an effort to increase shareholder value.
In total, Samsung Electronics is planning to buy back $7.97 billion worth of its shares in 2017. The figure corresponds to the all of the remaining return resources of the company's shareholders. The entire plan will be executed in three to four stages. Apart from greenlighting this initiative, the conglomerate's Board of Directors also confirmed a year-end dividend on Tuesday. The latest dividend for common shares of the company will amount to $23.57 while owners of preferred stocks will receive $23.62 per share. This decision marks a significant step for the company as its year-on-year dividend increase for 2016 amounts to 36 percent, interim dividend included. The total shareholder return will now reach almost half of the firm's yearly free cash flow of $21.35 billion and approximately $3.43 billion of it will be paid out as dividends, Samsung Electronics confirmed.
This latest turn of events is directly related to the fact that investors have recently been pressuring the company to increase shareholder value, claiming that its stock is undervalued by as much as 70-percent. The most recent calls for Samsung Electronics to unlock additional shareholder value have been spearheaded by Elliott Associates, a U.S. hedge fund that owns a minor stake in the South Korean tech giant. Last year, the hedge fund proposed the company to split into two and take a number of other measures to give its shareholders a better return on their investment. Samsung's efforts to repurchase its shares and its decision to significantly increase dividends are likely a direct response to that recommendation but as things stand right now, the Seoul-based conglomerate won't be splitting its operations anytime soon. It remains to be seen if Elliott Associates and other dissatisfied shareholders will think that's enough.