Key insights
- The price gap between Samsung's common and preferred stock is at an all-time high, with the preferred shares trading at a significant discount. Coupled with Samsung's commitment to a 50% FCF dividend payout, the preferred shares offer a higher yield. While the discount may persist, the higher yield provides a buffer. This may have a slight positive influence on US equities due to global market interconnectedness.
The gap between Samsung Electronics' common (005930) and preferred (005935) has been quietly blowing out all year. Historically it mean-reverts. Right now you're buying Samsung at a 37-cent discount on the dollar versus people buying the regular ticker.
On top of that, Samsung just committed to paying out 50% of FCF as dividends. Their earnings is going parabolic and is projected to be the most profitable company in the world. That dividend is going to get big. And preferred holders get it too.
The bear case is basically "the discount stays wide for a while." Sure. But you're still collecting a higher yield while you wait.
Preferred shares have no voting rights, which is why retail ignores them. Samsung's founding family controls the votes anyway 🤔
TLDR: Same Samsung, 37% cheaper, higher yield, historically anomalous discount. Ticker: 005935.