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4 Key Things Investors Should Know About SMRT Corporation Ltd’s Dividend

Many who live in Singapore are likely to be familiar with the company SMRT Corporation Ltd (SGX: S53).

That’s because the firm runs public bus, taxi, and rail services in our Garden City. In other words, SMRT Corporation is a firmament of Singapore’s public transportation landscape.

The company divides its business into eight different segments, namely, Train operations, Light Rail Transit (LRT) operations, Bus operations, Taxi operations, Rental, Advertising, Engineering Services, and Others. The first two are collectively referred to as the Rail business. The rest are considered Non-Rail businesses.

SMRT Corporation is also a regular payer of dividends. The land transport operator’s latest annual report had four key things related to its dividend that investors might want to know:

1. Revenue is rising

SMRT revenue chart
Source: SMRT Corporation’s annual report

Revenue is the starting point of a viable business. SMRT Corporation has done well here with it increasing sales over the past five years.

The company also handled over 2 million daily passenger trips in its MRT operations for its financial year ended 31 March 2016 (FY2016). It’s safe to say that its services are a daily necessity for many Singaporeans.

2. …But profits are lagging  

SMRT PATMI chart
Source: SMRT Corporation’s Annual Report

As noted earlier, SMRT Corporation has managed to grow its revenue over the past few years. But, its PATMI (profit after taxes and minority interests) has actually declined. From the above, we can see that the company’s PATMI had dipped from $119.9 million in FY2012 to a low of $61.9 million in FY2014 before rising back up to $109.3 million in FY2016.

3. The dividend policy

SMRT Corporation had declared its dividend policy in its latest annual report:

“SMRT’s dividend policy takes into account our long-term objective of maximizing shareholder value, the availability of cash and retained earnings, our expected financial performance and projected capital expenditure and other investment plans.

We endeavour to maintain a payout ratio of 60% of PATMI per year for the interim and final ordinary dividend. In any particular year, we may also propose a special dividend to provide investors with greater returns and yield.

In deciding on the dividend amount, a balanced evaluation is made taking into account our financial performance as well as future investments required to both improve operational performance and secure new business opportunities.”

As you can see, SMRT Corporation tags its dividend payout to its PATMI. The volatile PATMI has had an impact to its dividend, to say the least.

4. Historical dividend per share

SMRT Earnings and Dividend chart
Source: SMRT Corporation’s annual report

The fortunes of SMRT Corporation’s dividend has ebbed and flowed along with its earnings. SMRT Corporation’s dividend payout in FY2016 is still lower when compared to FY2012, similar to its profit picture as discussed earlier.

The four points above serve as a starting point for studying SMRT Corporation’s dividend. Other areas worth looking into include its balance sheet and free cash flow generation.

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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.