More dividends from Naver likely on back of strong cash flow Internet giant is also expected to retire shares worth $76 million later this year

Translated by Ryu Ho-joung 공개 2021-07-30 08:09:43

이 기사는 2021년 07월 30일 08:07 더벨 유료페이지에 표출된 기사입니다.

South Korea’s Naver is likely to pay more dividends to its shareholders as the company is expected to deliver stronger free cash flow and net profit this year.

Naver has set its dividend payout ratio of 5% based on a non-consolidated net profit, while targeting to allocate 30% of an average of its latest two-year consolidated free cash flow (FCF) to shareholder return.

In 2020, the company’s FCF grew to 526.5 billion won ($458.8 million) from an annual average of over 200 billion won for 2018-2019. The large increase was largely because the internet giant started to exclude its Japanese unit Line Corporation from its consolidated financial statements.

For this year, FCF is expected to further increase as the company’s profitability has improved. Naver calculates FCF as operating profit plus non-cash items less capital expenditure and taxes. First-half FCF is roughly estimated to be 231.9 billion won based on the company’s adjusted earnings before interest, taxes, depreciation and amortization of 921 billion won – which was up 21% from a year earlier – capital expenditure of 472.3 billion won and corporate tax expenses of 216.8 billion won.

If a similar FCF level is assumed in the second half, an estimated 140 billion to 150 billion won – or 30% of the estimated average of FCF for 2020-2021 – is expected to be allocated to shareholder return this year.

Naver reported a net profit of 673.3 billion won on a non-consolidated basis in the first half, meaning 33.7 billion won – or 5% of the fist-half net profit – should have been earmarked for dividend payments so far this year.

Based on this and assuming a similar performance in the second half, total dividends that will be paid this year are estimated to be more than 60 billion won, or the low 400 won range per share. Naver’s cash dividend per share has continued to increase from 314 won in 2018 to 402 won in 2020.

Naver will also retire treasury shares as part of its shareholder return policy. It will repurchase shares worth 51.4 billion won – or the balance allocated to shareholder return after paying dividends in 2020 – later this year. The company additionally plans to retire 35.5 billion worth of shares it holds in the second half, though the amount is subject to change depending on business conditions.

The company’s favorable shareholder return policy is good news for investors but could be a financial burden, particularly as Naver has been active in acquisitions.

Naver has spent more than 1 trillion won on investments so far this year. It acquired Canada-based storytelling platform Wattpad in a cash and share swap-deal worth $600 million and invested 410 billion won in entertainment company HYBE’s subsidiary BeNX. Naver also raised its capital contribution to its webtoon subsidiary by 204 billion won.

The company currently has cash and cash equivalents of 2.64 trillion won. (Reporting by Seul-gi Kim)
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