4 Key Things Investors Should Know About Sembcorp Marine Ltd’s Dividend

SembCorp Marine Ltd (SGX: S51) is an important global player in the offshore and marine industry. It builds oil rigs and helps to convert and repair certain types of vessels.

The company is one of the many in Singapore’s stock market that has been paying a dividend over the last decade. Sembcorp Marine’s latest annual report had four key things related to its dividend that investors might want to know:

1. Revenue has been fluctuating

2016-07-08 SembCorp Marine Revenue
Source: SembCorp Marine’s Annual Report

Every business needs revenue to survive. Sembcorp Marine has had a mixed bag of results over the past five years. Revenue has steadily increased from S$3.96 billion in 2011 to over $5.8 billion in 2014, only to retreat to $4.97 billion in 2015.

2. Net profit has been fluctuating too

2016-07-08 SembCorp Marine Profit
Source: SembCorp Marine’s Annual Report

Sembcorp Marine’s net profit has been patchy. The company recorded a high of $752 million in net profit for 2011 over the past five years. But, the bottom-line sank to $290 million in losses due to provisions Sembcorp Marine had to take for some of its rig building projects.

3. The dividend policy

In the annual report, Sembcorp Marine shared how it thinks about its dividend:

“The Group’s dividend payment has always been guided by earnings performance, and while we constantly strive to reward shareholders with a sustainable and consistent dividend, we are also mindful of the need to grow and position the company for long-term sustainable growth.”

The company also states its dividend policy in its website:

“The Group’s policy aims to balance cash return to shareholders and investment for sustaining growth, while aiming for an efficient capital structure. The company strives to provide consistent and sustainable ordinary dividend payments to its shareholders on an annual basis.”

In short, SembCorp Marine will be looking at how it can balance the need for growth and the goal to reward shareholders with a sustainable ordinary dividend. The company’s dividend will also be driven by its profit performance.

4. Historical dividend per share

2016-07-08 SembCorp Marine Dividends
Source: SembCorp Marine’s Annual Report

SembCorp Marine has kept its ordinary dividend relatively stable between 2011 and 2014. But, its dividend took a massive hit in 2015, falling from S$0.13 per share in 2014 to just S$0.06 per share. The lack of free cash flow and higher debt might be the cause of this decline.

There are many other things for investors to look at when studying a company’s dividend, but the four above can be useful starting points for Sembcorp Marine.

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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.