Samsung Electronics CFO says cash reserve not excessive

Samsung hosts first 'analyst day' in eight years

Samsung Electronics sought to reassure investors on Wednesday by promising to review its shareholder return policy every three years and continue heavy investment, as its share price sags despite record earnings.

Record profits have left the South Korean firm sitting on a $50 billion cash pile, equivalent to more than a fifth of its market capitalization. Even so, its shares are down 2 percent so far this year at a deep discount to peers like Apple, largely because of its investor-unfriendly returns.

"Our management view is that our product valuation multiple does not truly reflect our earnings growth and leadership position in the IT industry," Chief Financial Officer Lee Sang-hoon said at a day-long seminar for analysts in Seoul.

(Read more: Is Samsung losing its earnings momentum?)

Lee said Samsung would modify its dividend strategy based on a target yield, and manage its shareholder return policy on a three-year basis to reflect changes in business conditions.

Getty Images

Rather than specify a target dividend yield, he said the 2013 dividend payout would be around 1 percent of the share price. In 2012, Samsung's dividend payout amounted to 0.5 percent of its share price, leading to complaints from some investors that the company was hoarding cash at their expense.

Lee defended Samsung's growing cash position at the public meeting, the second such gathering of analysts the normally taciturn company has held in eight years.

"I know we have been somewhat conservative in M&A but it may be different in the future. Based on this, I don't believe the current level of net cash balance is excessive," he said.

(Read more: Samsung keeps it simple to overtake Apple)

He said the company's cash pile, at $50 billion as of the end of September, would be kept in reserve to prepare for potential "significant investment" in strategic technologies, mergers or acquisitions.

Samsung gains on Apple in tablet market share

"We plan to allocate a significant portion of our annual cash flow into capex and R&D to secure future growth and shareholder return," he said.

Shares in Samsung, the world's leading maker of smartphones, traded down 0.1 percent on Wednesday versus a 0.3 percent rise in the wider market.

(Read more: Samsung's biggest fear? Becoming 'too full' of itself)

The stock trades at seven times projected earnings, while Apple trades at a premium of 12.

Samsung's profits have risen to record highs in six of the past seven quarters, even as shareholder returns have fallen to the lowest level in at least five years.

The $228 billion company gave shareholders just 5.1 percent of its profit last year as dividends, compared with a 15.8 percent total payout in 2007 when it last bought back shares in the market.

Follow CNBC on Twitter: @CNBCWorld

Related Tags