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What is the Difference Between Treasury Stock Cancellation and Dividends? Analyzing SK Hynix's 40 Trillion Won Plan

SK Hynix resolved on August 19, 2026, to acquire and subsequently cancel approximately 40 trillion won (about 3.3% of issued shares) of its own treasury stock in the open market, while raising its free cash flow (FCF) return target to '50% or higher.' While dividends distribute cash to all continuous shareholders without altering the share count, treasury share buybacks and cancellations provide cash only to selling shareholders while increasing the equity stake and EPS of remaining shareholders. Dividend income is subject to a 15.4% withholding tax and potential comprehensive financial income taxation (with temporary tax separation privileges for high-dividend companies from 2026 to 2028), whereas cancellation does not immediately trigger taxes for remaining shareholders. KB Financial Group's 1.02 trillion won cancellation in 2025 serves as an example combined with a fixed total dividend policy, structurally designed to automatically boost dividends per share through cancellation. The revised Commercial Act implemented in March 2026 mandates the cancellation of acquired treasury shares within one year in principle, making stock buybacks by domestic companies effectively contingent on cancellation.