3 Key Things Investors Should Know About ComfortDelGro Corporation Ltd’s Dividends

ComfortDelGro Corporation Ltd  (SGX: C52) is a global land transport giant with a fleet of over 45,300 vehicles and operations in seven countries, namely, Singapore, Australia, the United Kingdom, China, Vietnam, Ireland, and Malaysia.

It has also been a regular payer of dividends. ComfortDelGro’s 2016 annual report was released earlier this week. Here are three things I learnt about the company’s dividend from the report:

1. Dividend policy

ComfortDelGro has a dividend policy of paying out at least 50% of its profit. The policy is described in its annual report:

“The Company’s dividend policy is to pay out at least 50% of profit attributable to Shareholders of the Company. The dividend policy takes into account the long-term objective of maximising shareholder value, availability of cash and retained earnings, projected Capital Expenditure and growth opportunities.”

In 2016, ComfortDelGro’s earnings per share was 14.72 cents. With a dividend of 10.30 cents per share, that works out to a 70% payout ratio for the year.

2. A rising dividend

Back in 2012, ComfortDelGro paid a dividend of 6.4 cents per share. As mentioned earlier, the company’s dividend in 2016 was 10.3 cents per share. This is an increase of almost 61% in four years, representing annual growth of 12.6%.

The growth in ComfortDelGro’s dividend is summarised in the chart below:

2017-04-06 ComfortDelgro Dividend
Source: ComfortDelgro’s annual report

3. How the dividends are funded

Dividends are nice to have for shareholders, but it does not come cheap for the company. For perspective, ComfortDelGro paid out $182.5 million in dividends in 2015. In 2016, this figure increased to $199.4 million.

Ideally, we would want ComfortDelGro to fund its dividend from its free cash flow.

For 2016, ComfortDelGro generated $314 million in free cash flow. So, the company’s dividend took up only 63% of its free cash flow in the year.

If ComfortDelGro is able to sustain its free cash flow, its current dividend should be adequately covered. Investors interested in ComfortDelGro’s dividend should be looking for the company to increase its free cash flow over time to have better assurance that the dividend can be sustained or increased in the future.

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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.