4 Quick Things for Investors to Know About M1 Ltd’s Dividend

M1 Ltd (SGX: B2F) may be a recognisable company for many investors in Singapore. That’s because it’s a provider of telecommunications services here. Although it may be the smallest player behind second-placed Starhub Ltd  (SGX: CC3) and the leader Singapore Telecommunications Limited (SGX: Z74), M1 still commands a sizeable market share of 23.8% in mobile as of January this year.

Investors may also recognise M1 due to the fact that it is a regular payer of dividends. The telco’s latest 2016 annual report had four key pieces of information related to its dividend that investors may want to know:

1. Service revenue has fallen for two years in a row

Here’s a chart showing the operating and service revenues for M1 from 2012 to 2016:

Source: M1’s annual report

Revenue is the starting point of a viable business. The number to watch here would be the service revenue, which is generally recurring in nature. M1 recorded growth in service revenue between 2012 and 2014. But, 2015 and 2016 have not been as good. The telco’s service revenue declined by 1% in 2015 and 2% in 2016.

2. Earnings have fallen as well, but free cash flow is better

The chart below shows M1’s earnings per share (EPS) and free cash flow (FCF) per share from 2012 to 2016:  

Source: M1’s annual report

M1’s EPS increased from 16.1 cents in 2012 to 19.1 cents in 2015. But, we can see that the EPS fell back to 16.1 cents in 2016.

The telco’s FCF has done a little better in recent times, rising from 10 cents in 2014 to 13.9 cents in 2016. But, M1’s 2016 FCF per share was lower compared to 2012 and 2013.

3. The dividend policy

M1 did not define a specific range in its annual report for what dividends it may pay out each year. It said:

“M1 is committed to maintain a sustainable dividend policy that will enhance long-term shareholder value.

In determining the dividend payout, the Board of Directors took into consideration the Company’s cash flow, financial leverage, investment requirements and the resources available to pursue new business opportunities which may arise in the near or medium term, as well as the outlook on the competitive landscape and economy.”

But, M1 has the following dividend guidance on its website for 2017:

“We have and will continue to pursue a sustainable dividend policy. Barring unforeseen circumstances, we aim to make a total cash distribution to shareholders equivalent to at least 80% of our full-year net profit after tax for FY2017.”

4. Historical dividend per share

Below, you can see a chart showing M1’s dividends from 2012 to 2016:

Source: M1’s annual report

M1’s dividends have declined over the past three years, falling by 10% in 2014, 19% in 2015, and 15.7% in 2016.

The four points above serve as a useful starting point for studying M1’s dividend. Other areas worth looking into include M1’s balance sheet, the amount of free cash flow the company generates, its growth prospects, and more.

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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.