Here’re What Investors Need to Know About Keppel Corporation Limited’s Dividend and Debt  

Keppel Corporation Limited (SGX: BN4) released its results for the first-half of 2016 less than two weeks ago.

The firm had cut its interim dividend and saw its debt levels climb. In Keppel Corp’s earnings presentation for its latest results, management had discussed both its dividend and debt. Here’re some snippets which may interest investors.

On dividends

Keppel Corp’s interim dividend for the first-half of 2016 was S$0.08 per share, some 33% lower than the S$0.12 per share interim dividend seen in the first-half of 2015.

Back then in 2015, the company’s annual dividend was already reduced by 29% when compared to the level seen in 2014.

One analyst pointed out during the earnings presentation that Keppel Corp has been increasing its debt while profits are falling. The analyst wondered if it would be more prudent for Keppel Corp to reduce its dividend further. Loh Chin Hua, Keppel Corp’s chief executive, responded:

“In deciding the dividend to pay, the board, working together with the management, looks very closely at paying a dividend that is sustainable, taking into account our balance sheet and taking into account the capital requirements for the business.

So rest assured that whatever dividend we have declared, it has been discussed at length and it is a dividend which we believe we can pay and is sustainable.”

Loh has expressed similar thoughts before about keeping the company’s dividend sustainable. But, only time will tell when it comes to Keppel Corp’s future dividend.

On debt

Keppel Corp’s net debt (total borrowings minus cash and equivalents) as of 30 June 2016 is at S$7.33 billion. The net gearing ratio is at 0.62.

Loh shared his thoughts on Keppel Corp’s gearing during the earnings presentation:

“I think you have heard Hon Chew, CFO, say various times that the comfortable gearing is we want to stay below 1x. So we are quite far from that. I think more importantly, you can see that our gearing ratio at least for the last two quarters has not grown as quickly. As I said in my opening remarks, we are still at a very comfortable level.”

Loh was referring to Chan Hon Chew, Keppel Corp’s chief financial officer. Later on in the presentation, Chan said:

“We do not have the issue of [debt] governance. Our gearing, as CEO mentioned earlier, is at manageable levels. We do not foresee our gearing to go anywhere close to 1x. So it is not an issue for us.”

The situation remains challenging for Keppel Corp. Investors may want to monitor Keppel Corp’s balance sheet and free cash flow in the coming quarters for clues on its future dividends.

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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 writer Chin Hui Leong doesn't own shares in any company mentioned.