Samsung went through a rather rough patch in the last few months. As if the second recall and discontinuation of the Galaxy Note 7 weren’t enough, the Seoul-based tech giant also found itself in the middle of a massive corruption scandal in the Far Eastern country. The company is currently in the process of trying to solve all of these issues, and if latest developments are any indication, Samsung chose the right way to approach the situation.
The company’s shares rose to a record high today after Samsung reiterated that it’s planning to review its corporate structure and promised larger capital returns to shareholders. More specifically, the biggest phone maker in the world announced plans to return half of its free cash flow in 2016 and 2017, adding that existing shareholders will receive 36% higher dividends this year than what was originally planned. As a consequence of this announcement, Samsung’s market value rose by $9 billion in less than 24 hours as investors quickly jumped at the opportunity to purchase more shares of the South Korean tech giant. This turn of events isn’t surprising given how dividends are one of the few reliable ways shareholders can make a return on their investment. In fact, if you’re an investor who’s content with making a slow but steady return, high dividends are the best thing you can hope for.
Now, it’s worth noting that this decision by Samsung was heavily influenced by the US activist hedge fund Elliott Management, the same one that recently proposed Samsung splits its operations. Even though the Seoul-based conglomerate is yet to decide whether to heed that particular advice, Reuters reports that most industry analysts and investors are relatively pleased with the latest announcements made by the company. In addition to increased payouts, Samsung also revealed that it’s planning to repurchase $9.8 billion of its shares next year, which would mark the largest buyback in the history of the South Korean tech giant. The company also confirmed that it’s still considering Elliott’s proposal to split into a holding and an operating company, so more information on that front is expected to follow soon. Elliott’s representatives described this announcement as a step in the right direction but noted that the hedge fund expects more from the Seoul-based firm in the future.