Here’s What Comfortdelgro Corporation Ltd Wants You to Know About its Dividends and Share Buybacks

Comfortdelgro Corporation Ltd  (SGX: C52) had a lot to share about its business in its latest 2015 annual report.

Investors may be interested to know about the company’s dividend policy and whether Comfortdelgro will consider share buybacks. I have looked through the annual report for clues and here’s what I found:

“We have also been disclosing our dividend policy since incorporation – where only 21.8% of companies do so.”

Lim Jit Poh, Comfortdelgro’s chairman, noted in the quote above that the land transport company belongs to a minority group that discloses an official dividend policy. Here’s how Comfortdelgro describes its dividend policy in its annual report (emphases mine):

“The Company’s dividend policy is to pay out at least 50% of profit after taxation attributable to Shareholders of the Company. The dividend policy takes into account the long-term objective of maximising shareholder value, availability of cash and retained earnings, projected capital expenditure and growth opportunities. The Company declares dividend semi-annually and informs its Shareholders of the dividend payments via announcements in the SGXNet.”

Comfortdelgro has been paying out dividends that adhere to its policy. For instance, Lim noted that the company’s latest dividend payout for 2015 was S$0.09 per share, or 64% of its earnings per share that year.

The dividend has also steadily risen over the past five years as summarised below:

2016-06-24 Comfortdelgro Dividends
Source: Comfortdelgro Corporation

But, investors shouldn’t expect Comfortdelgro to keep increasing its payout ratio. Lim wrote in the annual report:

“We also received letters from institutional investors offering their views on some aspects of corporate governance. Of particular interest is one substantial Shareholder reiterating its stand to resist short-term market pressures of returning excessive amounts of capital to investors through record levels of dividends and share buy-backs. We share this sentiment.”

Simply put, as Comfortdelgro earns profits from its operations, the company has a choice of plowing the profits back into the business or returning them to shareholders in the form of share buybacks or dividends.

As a company that is still growing, Comfortdelgro will have to find the right balance of maintaining its dividend at reasonable levels while keeping enough capital to fund its future business growth.

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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 company mentioned.