Samsung Electronics sets the midpoint of its 2026 shareholder returns at approximately W100tn; Goldman Sachs expects the actual amount to be near the top of guidance and primarily comprise dividends

Overview

This report analyzes Samsung Electronics' newly announced 2026 shareholder return plan and estimates the potential mix of dividends, share repurchases, and cancellations. Although the approximately W100tn guidance midpoint is below expectations shaped by earlier media reports, Goldman Sachs expects actual returns of approximately W106tn, near the top of the range, and believes future free cash flow growth and greater stability in returns will support a higher valuation.

Core views

Samsung Electronics announced its FY2026 shareholder return plan after the August 21 market close, projecting a remaining return pool of W90tn-W110tn. The company explained that, when calculating free cash flow, it will deduct upfront payments under long-term agreements (LTAs) and cash outflows arising from employee stock-based performance compensation. It also plans to pay approximately W30tn in cash dividends in the third quarter of 2026, with the specific plan to be determined by the board by the end of October. The remaining returns may take the form of dividends, share repurchases, and cancellations, with the board to make a decision in January 2027 after FY2026 results are finalized. Earlier media reports suggested that 2026 shareholder returns could reach approximately W150tn, so the W100tn guidance midpoint may be below market consensus. However, Goldman Sachs believes the final amount is more likely to be near the top of the range. It estimates cumulative free cash flow of approximately W270tn for 2024-2026E. Applying the company's current target of allocating 50% of free cash flow to shareholder returns implies total returns of approximately W135tn. After deducting W20.9tn of dividends and W8.4tn of share repurchases and cancellations paid in 2024-2025, approximately W106tn would be available for returns in 2026E. Goldman Sachs considers it reasonable to exclude upfront payments under memory business LTAs from free cash flow because most such payments are in the nature of deposits that must be refunded when customers fully perform their agreements. Regarding the return mix, Goldman Sachs expects the company to pay approximately W30tn in dividends in the third quarter of 2026, in line with guidance, and slightly more than W40tn at year-end. Including regular dividends for the first and second quarters of 2026, full-year dividends are expected to total approximately W76tn, corresponding to a payout ratio of approximately 25.5% and potentially enabling the company to qualify for separate taxation of dividend income. Subtracting W76tn of dividends from total returns of W106tn leaves approximately W30tn, which is expected to be used for additional share repurchases and cancellations. Unlike major Korean peers, Samsung Electronics did not immediately announce a comparable form of shareholder return, but Goldman Sachs expects its return mix to be more dividend-oriented because the company is closer to meeting the requirements for separate taxation of dividend income and because financial affiliates are subject to regulatory caps on their ownership of shares in nonfinancial group affiliates. The company has not yet announced a new return policy for 2027 and beyond, but Goldman Sachs expects free cash flow to increase significantly. Even if the company continues to target returning 50% of free cash flow, the shareholder return pools could reach W179tn in 2027E and W232tn in 2028E. To improve the stability of returns, Goldman Sachs assumes that regular quarterly dividends will rise to approximately W10tn per quarter in the future, followed by a larger payment at year-end. This suggests that shareholder returns will not merely be a one-time distribution but could establish a more sustained cadence of cash distributions over the next several quarters. Following adjustments to its cash flow assumptions and incorporating the impact of dividends, share repurchases, and cancellations, Goldman Sachs raised its EPS forecasts for 2026E, 2027E, and 2028E by 1%, 7%, and 11%, respectively. The new forecasts are W46,078, W71,848, and W87,588, versus previous forecasts of W45,623, W67,378, and W79,040. Its ROE forecasts for the same periods were raised to 53%, 52%, and 43% from 52%, 48%, and 39%; the more precise forecasts in the financial tables are 53.2%, 51.7%, and 43.4%. With the common shares trading at 1.7x 2027E P/B and 1.2x 2028E P/B while expected ROE reaches 40%-50%, Goldman Sachs considers the risk-reward attractive and believes sustained and substantial shareholder returns could drive valuation multiple expansion. The fundamental outlook also supports Goldman Sachs' positive stance. Samsung Electronics has leading global market shares across multiple product categories, including memory chips, OLED panels, smartphones, and televisions. Goldman Sachs expects strong profitability led by the memory business to continue, based on expectations that memory prices will remain firm and elevated and that customer LTAs may be more binding than in the past. The company is beginning to make tangible progress in HBM, and together with greater capacity for shareholder returns, this supports Goldman Sachs' reiterated Buy ratings on the common and preferred shares. Regarding valuation, the 12-month target price for the common shares is W490,000, based on a 2026-2027E EV/EBITDA sum-of-the-parts valuation, implying 74.1% upside from the current price of W281,500. The 12-month target price for the preferred shares is W360,000, implying 73.9% upside from the current price of W207,000. This target price applies a 27% discount for the preferred shares relative to the common shares, derived by averaging the discount indicated by a two-factor model and the average discount over the past month.

Analysis framework

Goldman Sachs first breaks down the company's announced return range, definition of free cash flow, and board execution timetable. It then multiplies estimated cumulative 2024-2026E free cash flow by the 50% target return ratio and deducts dividends and repurchases already paid to estimate the amount distributable in 2026E. The report subsequently estimates the mix of dividends and repurchases based on tax qualification requirements and ownership-related regulatory constraints, incorporating the new cash flow and capital return assumptions into its EPS, ROE, and valuation forecasts. Finally, it forms its rating view by considering memory prices, customer LTAs, HBM progress, and the relationship between P/B and ROE, and determines the target price using an EV/EBITDA sum-of-the-parts valuation.

Methodology notes

• Company Fundamentals and Financial FrameworkFree cash flow analysis

  Estimating shareholder returns at 50% of free cash flow

  The report uses cumulative 2024-2026E free cash flow of approximately W270tn as its basis, calculates approximately W135tn at a 50% target return ratio, and then deducts dividends and repurchases previously paid to derive estimated 2026E returns of approximately W106tn.

• Valuation MethodSOTP Valuation

  Sum-of-the-parts valuation based on 2026-2027E EV/EBITDA

  The report separately values the enterprise value of each Samsung Electronics business and sums them to derive a 12-month common-share target price of W490,000.

• Valuation MethodPB valuation

  P/B and ROE matching analysis

  Goldman Sachs compares 1.7x 2027E P/B and 1.2x 2028E P/B with expected ROE of 40%-50%. On this basis, it considers the current risk-reward attractive and believes sustained shareholder returns could drive valuation multiple expansion.

• Valuation Method

  Preferred-share discount relative to common shares

  The preferred-share target price applies a 27% discount, calculated as the average of the preferred-share discount indicated by a two-factor model and the average discount of the preferred shares relative to the common shares over the past month.

• Industry/Sector Analysis FrameworkSupply-demand framework

  Memory chip supply-demand and pricing analysis

  Based on expectations that memory prices will remain firm and elevated and that customer LTAs will become more binding, the report concludes that the memory business can continue to support Samsung Electronics' profitability.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Samsung Electronics common shares (005930.KS)

  Goldman Sachs reiterates its Buy rating, believing that memory business profitability, HBM progress, and sustained shareholder returns could drive valuation multiple expansion.

  Strengths

  Leading market shares in products including memory chips, OLED panels, smartphones, and televisions; expected ROE of 40%-50%, with significant growth in free cash flow and shareholder returns.

  Weaknesses

  The approximately W100tn midpoint of 2026 guidance is below the roughly W150tn expectation shaped by earlier media reports, and the company did not immediately announce return arrangements comparable to those of major Korean peers.

  Comparison

  Compared with major Korean peers, Goldman Sachs expects Samsung Electronics' return mix to be more dividend-oriented; the common-share target price is based on an EV/EBITDA sum-of-the-parts valuation.

  Risks

  A significant deterioration in memory supply-demand conditions, a sharp contraction in smartphone margins, and loss of mobile OLED market share.

• Samsung Electronics preferred shares (005935.KS)

  Goldman Sachs assigns a Buy rating and a 12-month target price of W360,000, implying 73.9% upside.

  Strengths

  Benefits from the same earnings growth and expansion in shareholder returns as the common shares, with support from cash dividends.

  Weaknesses

  Valuation is affected by the level of discount relative to the common shares.

  Comparison

  The target price applies a 27% discount to the common-share value, calculated as the average of the two-factor model result and the average discount over the past month.

  Risks

  In addition to company fundamental risks, the actual trading discount of the preferred shares relative to the common shares may differ from the target discount assumption.

Key data

• Guidance for remaining 2026 shareholder returnsW90tn-W110tnMidpoint of approximately W100tn; earlier media reports mentioned potential returns of approximately W150tn.
• Goldman Sachs' estimate of 2026E shareholder returnsApproximately W106tnNear the top of the company's guidance range.
• Cumulative free cash flow for 2024-2026EApproximately W270tnAt a 50% target return ratio, total returns would be approximately W135tn.
• Returns implemented in 2024-2025Dividends of W20.9tn; share repurchases and cancellations of W8.4tnAfter deducting these from estimated cumulative returns, approximately W106tn is derived for 2026E.
• 2026E dividendsApproximately W76tnIncludes regular dividends for the first and second quarters, approximately W30tn in third-quarter dividends, and slightly more than W40tn in year-end dividends.
• 2026E dividend payout ratio25.5%Goldman Sachs believes this level could enable the company to qualify for separate taxation of dividend income.
• Additional 2026E share repurchases and cancellationsApproximately W30tnDerived by subtracting approximately W76tn of dividends from total returns of W106tn.
• Future shareholder return pools2027E W179tn; 2028E W232tnAssumes the company continues to allocate 50% of free cash flow to shareholder returns.
• EPS forecast revisions2026E +1%; 2027E +7%; 2028E +11%The new forecasts are W46,078, W71,848, and W87,588, respectively; the previous forecasts were W45,623, W67,378, and W79,040.
• ROE forecasts2026E 53%; 2027E 52%; 2028E 43%The previous forecasts were 52%, 48%, and 39%, respectively; the precise values in the financial tables are 53.2%, 51.7%, and 43.4%.
• Forward P/B2027E 1.7x; 2028E 1.2xGoldman Sachs compares these with expected ROE of 40%-50%.
• Free cash flow yield2026E 11.7%; 2027E 20.2%; 2028E 26.1%Financial forecasts show free cash flow yield rising year by year.
• Dividend yield2026E 4.2%; 2027E 6.4%; 2028E 7.8%Reflects the report's expectation that dividends will increase alongside free cash flow.
• Common-share target price and upsideW490,000; 74.1%12-month target price; current price W281,500.
• Preferred-share target price and upsideW360,000; 73.9%12-month target price; current price W207,000, with a target discount of 27%.

Impact & implications

The report believes that although the midpoint of the 2026 return guidance is below the market's prior expectation of approximately W150tn, the actual amount could be near the top of the range, with dividends accounting for a larger share. As free cash flow grows, shareholder returns could expand further and become more stable in 2027 and 2028. Together with higher EPS and ROE forecasts, this could narrow the valuation gap between strong profitability and the current P/B multiple. Memory prices, more binding customer LTAs, and progress in HBM provide fundamental support for earnings and cash returns.

Risks

• A significant deterioration in memory chip supply-demand conditions.
• A sharp contraction in smartphone business margins.
• Loss of mobile OLED market share.

What to watch

• Monitor the board's decision by the end of October on the specific plan for approximately W30tn in third-quarter cash dividends.
• Monitor how the board allocates the remaining free cash flow in January 2027 after FY2026 results are finalized, including the final mix of dividends, share repurchases, and cancellations.
• Monitor whether the company adopts higher regular dividends of approximately W10tn per quarter from 2027 onward, followed by a larger year-end payment.
• Monitor whether memory prices remain elevated, the binding nature of customer LTAs, and further progress in the HBM business.