3 Key Things Investors Should Know About Sembcorp Industries Limited’s Dividend

Sembcorp Industries Limited (SGX: U96) has been paying a dividend in each year over the last decade.

The company’s revenue comes from its three different business segments: Utilities; Marine; and Urban Development & Others. Sembcorp Industries’ latest 2015 annual report was released a few months back. It contained three key things related to its dividend that investors might want to know:

1. Revenue and net profit have been fluctuating

2016-07-07 Revenue and Net Profit SembCorp Industries
Source: Sembcorp Industries’ annual report

Revenue is the life blood of any business. On this front, Sembcorp Industries has had a mixed bag of results over the past five years – it had seen its revenue increase from $9.05 billion in 2011 to nearly $11 billion in 2014, only to then retreat to $9.5 billion in 2015.

The net profit picture looked even worse. Sembcorp Industries’ bottom-line remained more or less flat from 2011 to 2014 before falling to just $549 million in 2015.

2. The dividend policy

Sembcorp Industries had shared its dividend policy in its annual report:

“Sembcorp is committed to achieving sustainable income and growth to enhance total shareholder return. The Group’s policy aims to balance cash return to shareholders and investment for sustaining growth, while maintaining an efficient capital structure. The company strives to provide consistent and sustainable ordinary dividend payments to its shareholders on an annual basis.”

In short, the company’s focus is on how it can balance the need for growth with the aim to reward shareholders.

3. Historical dividend per share

2016-07-07 SembCorp Industries Dividend
Source: Sembcorp Industries’ annual report

Sembcorp Industries has kept its ordinary dividend relatively stable between 2011 and 2014. But, the payout took a hit in 2015, falling from $0.16 per share in 2014 to $0.11 per share. The lack of free cash flow and a higher level of debt might have been the cause of the decline.

The three points above serve as a starting point for studying Sembcorp Industries’ dividend. Other areas worth diving into include its balance sheet and the amount of free cash flow it generates.

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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.