What Does the Future Hold for Dividend Stock Wilmar International Limited? – Part 1

Shares of WIlmar International Limited  (SGX: F34) have turned in an underwhelming performance over the last five plus years; since 1 January 2010, Wilmar’s shares have shrunk by 49% in value.

This is a huge contrast to the 12.8% gain that the SPDR STI ETF (SGX: ES3) – an exchange-traded fund tracking the market barometer, the Straits Times Index (SGX: ^STI) – has delivered over the same period.

As a dividend payer, Wilmar has done a little better. Its dividends have grown over the last five years and it has paid out a total of 32 Singapore cents per share over that period. You can see these in the table below:

Financial year ended 31 December Dividends per share
(Singapore cents)
2010 5.5
2011 6.1
2012 5.0
2013 8.0
2014 7.5

Source: Wilmar’s Website

What’s next for Wilmar’s shares and dividends? An answer to these could come from a study of the company’s business. This article is the first of a two-part series which will take a closer look at various aspects of Wilmar’s business so that you can gain some perspective on what’s important to focus on.

A closer look

As Asia’s leading agribusiness group, Wilmar is engaged in a variety of businesses in the agriculture sector.

According to its corporate profile, the company has 450 manufacturing facilities and a distribution network which spans 50 countries. Wilmar’s businesses are divided into seven main business segments: Palm and laurics (the most important segment in terms of revenue contribution); oilseeds and grains; consumer products; plantation and palm oil mills; sugar (milling); sugar (merchandising); and others.

Wilmar - Business Segment Revenue

Source: Wilmar’s earnings report; revenue eliminations not included

From 2010 to 2014, Wilmar’s top-line had undergone a healthy 42% expansion from US$30.4 billion to US$43.1 billion. The source of growth was broad based, with the highest percentage gains coming from the oilseed and grain and consumer products business segments.

Although Wilmar’s revenue growth from 2010 to 2014 seems healthy, we should note that the agribusiness’s revenue has practically stalled since 2011 when revenue was US$44.7 billion. Wilmar had acquired Sucrogen in 2011 and the acquisition contributed to the sharp spike in revenue in the year and also helped pave the way for Wilmar’s involvement in the sugar business.

Foolish summary

The exercise above is to look at the various aspects of Wilmar’s sales.

As a next step, we should also observe the company’s bottom-line, cash flows, and balance sheet as these would be what can boost growth in Wilmar’s share price as well as provide the fuel for future dividends. But, that’s for the next article in the series.

At its current share price of $3.28, Wilmar has a dividend yield of 2.3% (based on its dividend in 2014) and is valued at a trailing price-to-earnings ratio of 12.5.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.