No investor likes to experience the pain of a dividend cut. However, this phenomenon is almost impossible to avoid as businesses go through ups and downs according to the ebb and flow of the economy.
Companies cut dividends for a variety of reasons, ranging from the need to conserve more cash for a rainy day, poorer profitability due to decreased demand for their products and services, and also preparation for a large merger and acquisition.
Investors need to analyse the underlying reasons for the reduction in dividends as not all such events are negative by nature. A reduction in dividends can help prepare the company for rough weather ahead and conserve precious cash, but there are also cases where a decrease in dividends marks the start of a long, painful decline in business performance.
Here are four companies that recently reduced their interim dividends.
1. Keppel Corporation Limited
Keppel Corporation Limited (SGX: BN4) is a conglomerate involved in offshore oil-rig construction, property development and investments, infrastructure solutions and investment holdings.
For its H1 2019 earnings, Keppel announced an 11% year-on-year increase in revenue to S$3.3 billion. Operating and net profit, however, tumbled by 37% and 39% year-on-year respectively. Keppel’s interim dividend was reduced by 20% from 10 Singapore cents last year to 8 Singapore cents. Investors should note that for H1 2018, a special dividend of 5 Singapore cents was paid out as well.
2. Singapore O&G Limited
Singapore O&G Limited (SGX: 1D8), or SOG, provides specialist medical services in the Obstetrics and Gynaecology field in Singapore. The group also provides a range of specialist medical services catering to the medical needs of women and children and has a total of 16 specialist medical practitioners.
For H1 2019, SOG reported a 10.8% year-on-year increase in revenue. However, the group was impacted by higher expenses, resulting in a 22.5% year-on-year fall in profit for the period. The interim dividend was reduced from 0.8 Singapore cents last year to 0.62 Singapore cents, a 22.5% drop.
3. APAC Realty Limited
APAC Realty Limited (SGX: CLN) is a leading real estate services provider and holds the ERA regional master franchise rights for 17 countries in Asia-Pacific. ERA Realty is one of Singapore’s largest real estate agencies with more than 6,800 salespersons, and the group provides property brokerage services and rental of residential, commercial and industrial properties.
For H1 2019, APAC reported a 28.2% decline in revenue consistent with falling property transaction volumes. Profit after tax plunged by 63% year-on-year to S$5 million and the interim dividend was slashed from 2 Singapore cents to 0.75 Singapore cents, a 62.5% decline.
4. Nordic Group Limited
Nordic Group Limited (SGX: MR7) is a supplier of automation systems integration solutions, vessel maintenance, repair and overhaul (MRO), scaffolding and insulation services and environmental engineering services. The group serves mainly the offshore oil and gas and petrochemical industries.
For H1 2019, Nordic suffered a 17% year-on-year decline in revenue, while net profit attributable to shareholders plunged by 45% year-on-year to S$4.3 million. As a result, the interim dividend was slashed by 45% from 0.779 Singapore cents to 0.429 Singapore cents.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Singapore O&G Limited and Nordic Group Limited. Motley Fool Singapore contributor Royston Yang does not own shares in any of the companies mentioned.