Author Archives: ff152252

We’ve all seen the headlines. Samsung is back and better than ever. Its cash and cash equivalents grew from approximately $22 billion in 2010 to 40 billion in 2013 with the help of its latest smartphone release, the Samsung’s Galaxy S4 in April 2013. Nothing left to do but celebrate right? You’re wrong. As the late rapper Biggie Smalls once said “the more money we come across the more problems we see”, and Samsung is no different.

Here is where the problem lies. As a stockholder in a company that has considerably increased its profits, I will undoubtedly seek a higher return on my investment in the form of an increase on dividends. We’ve seen this situation most recently with Apple shareholders. They began requesting an increase on dividends because Apple amassed a stockpile of $145 billion in retained earnings, while paying shareholders less than $3 per share.

With Apple’s news still fresh in the minds of Samsung investors, Samsung is now placed in a difficult position. Should they increase dividends that are currently “1% of the share price”, resume stock buybacks that haven’t occurred since 2007, acquire other companies, or focus on R&D for future projects.

According to an official at Samsung it is the latter. In prior years Samsung reinvested a significant amount of money in areas that would create future profits. Although their profits increased from 2011 to 2012, they kept spending relatively the same amount, approximately $16 billion on capital expenditures in both years. This has also contributed to their increase in Retained Earnings.

Hong Kong Based Analyst, Mark Newman predicts that Samsung will use their stockpile of cash for a large acquisition and stock buyback. I’m no expert but I do agree with Mr. Newman’s second prediction. If Samsung doesn’t want an Apple sized problem on its hands it better start showing shareholders the money.

Bibliography

• Wakabayashi, Daisuke, and Min-Jeong Lee. “Samsung’s Sweet Problem? Nearly $40 Billion in Cash.” Wall Street Journal [New York] 8 May 2013: B1+. Print.
• Svensson, Peter. “Apple to Dole out $100B to Shareholders.” Yahoo! News. Yahoo!, 23 Apr. 2013. Web. 08 May 2013.