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4 Key Things Investors Should Know About M1 Ltd’s Dividend

M1 Ltd (SGX: B2F) might be a recognisable company for many in Singapore.

It is the smallest player within Singapore’s telecommunications industry, sitting in third-place behind second-placed Starhub Ltd  (SGX: CC3) and leader Singapore Telecommunications Limited  (SGX: Z74).

M1 has four business segments, namely, Mobile services, Fixed services, International Call services, and Handset sales; the first three are collectively known as Service revenue.

The telco is also a company that has been consistently paying an annual dividend over the last decade. Its latest annual report had four key things related to its dividend that investors might want to know:

1) Revenue has been climbing slowly

M1 revenue chart from annual report
Source: M1’s Annual Report

A viable business needs, first of all, revenue. The number to watch here for M1 would be its Service revenue, which is generally recurring. M1 recorded growth in Service revenue between 2011 and 2014. But, the past year has not been as good; Service revenue had declined by 1% to $822 million.

2) Earnings have risen slowly too. But…  …  

M1 earnings and free cash flow chart from annual report
Source: M1’s Annual Report

The chart above show that M1’s earnings per share (EPS) has increased slightly from 18.1 cents in 2011 to 19.1 cents in 2015.

But there is still a cause for concern. From the same chart, we can see that M1’s free cash flow (FCF) in 2015 has declined compared to 2011. M1’s FCF per share was 11.3 cents in 2015, which is a sizable drop from the 17.8 cents recorded in 2011.

3) What about its dividend policy?

M1 does not define a specific range for the dividends it might pay out each year. In its latest annual report, M1 described its considerations for its dividend:

“M1 is committed to maintain a sustainable dividend policy that will enhance long-term shareholder value…

…In determining the dividend payout, the Board of Directors took into consideration the Company’s cash flows, financial leverage, investment requirements and resources available to pursue new business opportunities which may arise in the near or medium term, as well as economic outlook.”

For 2016, M1 has included this guidance on its website:

“For FY2016, we aim to make a total cash distribution to shareholders equivalent to at least 80% of our full-year net profit after tax.”

4) Historical dividend per share

M1 dividend from annual report
Source: M1’s Annual Report

M1’s dividends have declined over the past two years. This might not be surprising, given the relatively lower FCF generated in 2014 and 2015.

The four points above serve as a starting point for studying M1’s dividend. Other areas worth looking into include its balance sheet.

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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.