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This Well-Run Company Continued Paying Dividends Through The Global Financial Crisis

The Global Financial Crisis (GFC) from 2008 to 2009 caused much hardship and stress to numerous companies. Those which had borrowed too heavily found themselves in big trouble when credit markets seized up, depriving them the opportunity to roll over their loans. Others found that their operating cash flow declined drastically as business was hit badly by fear and poor consumer sentiments, causing companies to either suspend dividend payments or slash them drastically.

One company though, Boustead Singapore Limited (SGX: F9D), managed to continue paying dividends throughout the entire financial crisis. The group has four key divisions — energy-related engineering, real-estate solutions, geo-spatial technology and healthcare. Let us take a look at this company’s dividend history and also delve a little into its future to see if the company can continue to pay out decent levels of dividends.

Boustead’s dividend history

Source: Author’s compilation from Boustead’s SGXNet filings

From the table above, it can be seen that the company had continued paying very healthy dividends through the GFC, and also continued paying dividends in the years thereafter. It was only in 2017-2018 that dividends fell to 3.0 Singapore cents and below.

Conservative conglomerate run by prudent management

Boustead maintains a very conservative balance sheet over the years which is always chock full of cash, and the company also generates very healthy free cash flow yearly. As of 31 December 2018 (3Q 2019), the group held a net cash position of S$115.4 million, translating to a net cash per share of 23.4 cents.

Two divisions under pressure

The key reason why dividends had declined in the last two recent financial years was due to Boustead’s two key divisions facing business challenges. Energy-related engineering, which primarily consisted of contracts with oil and gas companies, faced a crisis due to the collapse in oil prices in 2014, although a modest recovery has occurred in the last 18 months. Real-estate solutions also faces over-supply in the industrial real estate space, making it tough for the company to grow its real estate solutions portfolio. As a result of lower profits from these two divisions, dividends were also adjusted downwards to reflect this business reality.

The future looks promising

Despite these challenges, the group has managed to do relatively well due to the resilience of its geo-spatial division, which is the group’s cash cow. Healthcare division, which was acquired in June 2018, also shows promise as a resilient division which is not exposed to the cyclical swings of the economy.

Boustead continues to maintain a strong balance sheet flushed with cash, and its ability to continue paying dividends should remain uninterrupted by the current challenges it is facing.

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The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore has a recommendation for Boustead Singapore. The Motley Fool Singapore contributor Royston Yang owns shares in Boustead Singapore.