Samsung Group shares jump on speculation over dividend increases

[SEOUL] Shares of companies that are part of the Samsung Group climbed amid speculation the family-controlled conglomerate may raise dividends at some units following the death of Chairman Lee Kun-hee, to help his heirs raise funds to pay the inheritance tax.

Samsung C&T Corp was up 13 per cent at close in Seoul, the biggest gain since 2015, after surging as much as 21per cent. Jay Y Lee, the first son, holds a large stake in the de facto holding company of South Korea's largest conglomerate. Samsung Life Insurance Co and Samsung SDS Co rallied 3.8 per cent and 5.5 per cent, respectively.

Lee Kun-hee's heirs are estimated to have to pay about 10.9 trillion won (S$13.13 billion) in inheritance tax, according to a note from Korea Investment & Securities. Samsung Life may raise dividends considering that it holds stakes in Samsung Group financial units that are generating solid profits, according to Jongwoo Yoo, an analyst at Korea Investment.

While dividend hikes alone may not be enough for the family to foot the tax bill, they are "a rational way to raise cash," according to Jeon Kyung-Dae, chief investment officer for equities at Macquarie Investment Management Korea.

"It needs to be seen whether the units have the capacity to raise payouts," he said. "The deceased chairman had been hospitalized for a long time, so the Samsung Group must have prepared a plan for succession."

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