4 Key Things Investors Should Know About Singapore Telecommunications Limited’s Dividend

Singapore Telecommunications Limited  (SGX: Z74) is a recognisable company for many in Singapore and that’s because it is the largest provider of telecommunications services here.

It has also been consistently paying an annual dividend over the last decade. Singtel’s latest annual report had four key things related to its dividend that investors might want to know:

1) Revenue has declined

2016-07-04 Singtel Revenue

2016-07-04 Singtek FCF2016-07-04 Singtel Dividend
Source: Singtel’s annual report

A business needs, first of all, revenue to be viable. Unfortunately, Singtel’s top-line has declined over its past five fiscal years, falling from S$18.8 billion in FY2012 to S$17.0 billion in FY2016. A big culprit is Optus’s revenue decline in Singapore dollar-terms; Optus is Singtel’s Australian subsidiary and its results have been held back by the falling Australian dollar.

The good thing is Singtel’s Singapore revenue has grown steadily from FY2012 to FY2016.

2) … And so has free cash flow   

Singtel’s free cash flow had been relatively stable between FY2012 and FY2015. But there is a cause for concern – as the table above shows, there was a noticeable decline in free cash flow in FY2016.

3) The dividend policy

Singtel’s dividend policy is to payout between 60% and 75% of underlying net profit as a dividend. The company had shared more information about its thinking behind its dividend in the latest annual report:

“The Group monitors capital based on gross and net gearing ratios, and the dividend payout ratio ranges from 60% to 75% of underlying net profit. Underlying net profit is defined as net profit before exceptional and other one-off items.”

4) Historical dividend per share

Singtel has increased its dividend over its past five fiscal years, from S$0.158 per share in FY2012 to S$0.175 in FY2016. But as its free cash flow had declined in FY2016, investors may want to watch for improvements in the area.

The four points above serve as a starting point for studying Singtel’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 company mentioned.