Singapore Press Holdings Limited (SGX: T39) is a publisher of major newspapers in Singapore, such as The Straits Times, The Business Times, Berita Harian, Lianhe Zaobao, and more. But there’s more to the company. It is also in the real estate business and has some interests in areas such as events management. As part of the firm’s real estate activities, it is the majority owner and manager of SPH REIT (SGX: SK6U), a real estate investment trust that owns retail malls in Singapore. To investors, Singapore Press Holdings may be best-known for its dividends – the company has a dividend yield of…
Singapore Press Holdings Limited (SGX: T39) is a publisher of major newspapers in Singapore, such as The Straits Times, The Business Times, Berita Harian, Lianhe Zaobao, and more.
But there’s more to the company. It is also in the real estate business and has some interests in areas such as events management. As part of the firm’s real estate activities, it is the majority owner and manager of SPH REIT (SGX: SK6U), a real estate investment trust that owns retail malls in Singapore.
To investors, Singapore Press Holdings may be best-known for its dividends – the company has a dividend yield of 5.3% right now (thanks to its current share price of S$3.78 and dividend of S$0.20 per share for its fiscal year ended 31 August 2015) and has paid an annual dividend over its last 10 fiscal years.
Here are three things investors may want to know about the company’s dividend.
The pay-out ratio
The pay-out ratio measures a company’s dividend as a percentage of its profit. Profits are an important source of a company’s dividends. In general, it is hard for a company to maintain its dividend if it is paying out all (or more) of its profit.
With Singapore Press Holdings’ earnings per share of S$0.20 in fiscal 2015 and its aforementioned dividend of S$0.20 per share in the same year, the company’s pay-out ratio is thus 100%.
The amount of cash on hand
Dividends are usually paid out to investors in the form of cash. It is thus obvious that a company must have enough cash in its balance sheet to pay a dividend.
As of 31 May 2016, Singapore Press Holdings has S$278.5 million in cash and equivalents, S$356.7 million in short-term investments, and S$605.2 million in long-term investments.
Singapore Press Holdings declared final and special dividends of S$0.13 per share in the fourth-quarter of fiscal 2015 (the remaining S$0.07 per share in dividend for the whole of fiscal 2015 was declared in the second-quarter of the year).
If we assume that Singapore Press Holdings maintains that amount of dividends in the fourth-quarter of fiscal 2016, the company will need to pay out a total of around S$208 million (1.6 billion shares multiplied by a dividend of S$0.13 per share).
This amount is eclipsed by Singapore Press Holdings’ combined total of S$1.24 billion in cash & equivalents, short-term investments, and long-term investments.
The gearing level
Gearing is a fancy name for a company’s debt-to-shareholders’ equity ratio. What it does is act as a proxy for the level of financial risk that a company is taking on – in general, lower ratios are preferred.
Although there is no direct relationship between a company’s gearing and its dividend payments, a company with high gearing may face challenges when paying out dividends. That’s because the presence of debt may limit a company’s flexibility with how it uses its cash, especially in situations when the company finds itself in a weak business environment.
In the case of Singapore Press Holdings, it has a gearing of 38%.
Investors may also want to note that the company’s largest revenue segment – Media – is facing difficulties at the moment. Singapore Press Holdings’ newspaper ad revenue (a big chunk of Media revenue) has fallen for four straight years from fiscal 2012 to fiscal 2015. The decline continued in the third-quarter of fiscal 2016.
A Foolish conclusion
Singapore Press Holdings is a company with a gearing ratio of less than 50% and a cash-rich balance sheet. But, it also has a pay-out ratio of 100% and is struggling with its main revenue driver.
It must be noted that all we’ve seen above should be treated only as starting points for further research on Singapore Press Holdings’ dividend. There are many other things for investors to consider before any investing decision can be reached.
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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 Lawrence Nga doesn’t own shares in any companies mentioned.