4 Quick Things to Know About Sembcorp Marine Ltd’s Dividend

Sembcorp Marine Ltd (SGX: S51) is a regular payer of dividends.

As a quick background, Sembcorp Marine 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. It is also majority owned by Sembcorp Industries Limited (SGX: U96).

The rig builder’s latest 2016 annual report had four key pieces of information related to its dividend that investors may want to know:

1. Revenue has been falling

The chart below shows Sembcorp Marine’s revenue from 2012 to 2016:

Source: Sembcorp Marine’s annual report

Revenue is the starting point of a viable business.

Sembcorp Marine has seen its ups and downs over the past five years. The firm’s revenue had increased from $4.43 billion in 2012 to over $5.8 billion in 2014. But the last two years have been challenging, to say the least. The rig builder’s 2015 revenue declined to less than $5 billion, and then fell further in 2016 to $3.55 billion, the lowest level in the five-year period shown in the chart above.

2. Net profit has also fallen

Here’s a chart of Sembcorp Marine’s net profit from 2012 to 2016:

Source: Sembcorp Marine’s annual report

Sembcorp Marine’s net profit has been hit hard in the last two years.

The company recorded a high of $560 million in net profit for 2014. From there, the bottom-line started falling off a cliff – more specifically, into $290 million in losses in 2015. The losses were due to provisions that Sembcorp Marine had to take for some of its rig building projects.

There was a recovery in profit in 2016 to $79 million. But, the $79 million level is a far cry from the company’s 2014 profit level.

3. The dividend policy

In Sembcorp Marine’s annual report, the company shared the following information about its thinking on dividends:

“The Company aims to balance returns to shareholders with the need for long-term sustainable growth. It strives to provide shareholders annually with a consistent and sustainable dividend based on cash position, working capital, capital expenditure plans, acquisition opportunities and market environment.”

The company’s website had even more on the dividend policy:

“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 is looking at how it can balance the need for growth with the goal to reward shareholders with a sustainable ordinary dividend.

4. Historical dividend per share

The chart below shows Sembcorp Marine’s annual dividend from 2012 to 2016:

Source: SembCorp Marine’s annual report

Sembcorp Marine kept its total dividend unchanged between 2012 and 2014. But, the dividend took a massive hit in 2015, falling from 13 cents per share in 2014 down to just six cents. In 2016, Sembcorp Marine’s dividend fell yet again, this time to just 2.5 cents per share.

The four points above serve as a starting point for studying Sembcorp Marine’s dividend. Investors may also want to look at other aspects of the company, such as its balance sheet and free cash flow.

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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.