Dividend investors usually are cautious with investing in technology companies.
Samsung seems to offer a nice middle road between expensive US tech companies and (with obvious reasons) much cheaper Chinese tech companies.
I assess the company as a potential investment for conservative (dividend) investors looking to add technology exposure to their portfolio.
georgeclerk/iStock Unreleased via Getty Images As mentioned in previous articles, I am regularly on the lookout to expand my dividend-focused portfolio with more technology-focused companies with a reasonable valuation and ideally also paying some dividends.
In this article, I analyze Samsung Electronics ( OTC:SSNNF ) ( OTC:SSNLF ) as a potential investment and share the reasons that I identified to like and less like the company from an investor’s point of view.
US technology companies like Amazon ( AMZN ), Alphabet ( GOOG ), Apple (NASDAQ: AAPL ) and Netflix ( NFLX ) have experienced strong share prices increases during the last years and are (in my humble opinion) too high valued to be good investments right now. In comparison, Chinese technology companies like Alibaba ( BABA ), Baidu ( BIDU ) and Tencent ( OTCPK:TCEHY ) show a completely opposite picture. Being aware of all the political issues and uncertainties surrounding them, I also don’t see them as good investments right now. Data by YCharts Recently a friend of mine brought Samsung Electronics to my attention to take a closer look at. The company share price development is between those of US and Chinese technology companies. During the same time frame, the share price increased by ‘only’ 71%. The company also seems to offer a modest dividend payout. Source: Yahoo Finance (unfortunately I could not find share price data on SA)
Let’s take a closer look at the company, how they have been performing and the current valuation.
In this article, many financials are shown in Korean Wong (KRW). For your reference, one USD represents 1,183 KRW at the time of writing. Recap: my investment strategy and goal
Let me first recap my personal investment strategy and goal, to help you better understand my perspective. My goal is to reach financial independence years before my official retirement age of 67 (or perhaps even 70 or later by then). This independence is achieved when my annual dividend income equals or exceeds my annual cost of living. At that moment I become completely independent from the income from my full-time job. Maybe I am still happily working in a full-time job and continue working, but maybe I decide to quit and find a different meaning for the remainder of my life. Achieving this goal of financial independence seems very realistic and from the back of the envelope calculations, I can achieve it within the next 10-15 years.
All my investment decisions are made with this ultimate goal in mind. This means that whenever I have money to invest (my monthly addition to my investment account or re-investing dividend), I assess how it brings me closer to reach this goal. This means that I look at the dividend that I expect the investment to generate immediately, but also 10 – 15 years into the future. This means that I always try to balance between a reasonable entry yield and expected dividend growth. I also only invest in undervalued or fairly valued high-quality companies and intend to hold them for decades. Safety of principal and foremost reliability of the dividend are extremely important to me. Introduction to Samsung Electronics
Samsung Electronics Co. Ltd. is a South Korean electronics company founded in 1969. In the 52 years they have been around, they have grown to a globally operating company with 287k employees and a market cap of USD 440B. Total revenue in 2020 was 240KRW trillion or USD 200B. Operating Income in 2020 was 36KRW trillion or USD 30B.
The company is divided in the following main segments: CE – Consumer Electronics
IM – IT & Mobile Solutions
DS – Device Solutions (Semiconductor + Display Panel)
Please check out the following table from their Q3 2021 earnings presentation to see the break-down of the different segments.
Recently Samsung announced that the Device Solutions and mobile units will be combined.
Let me share with you the reasons I found to like and less like Samsung when analyzing the company from an investor point of view.
Reasons to like Samsung Increasing shareholder value At an overall level, the company has been able to steadily increase shareholder’s equity consistently during the last 5 years. Shareholder equity increased from 193 KRW […]