In the News
Asked 2w ago
Read on the news that SPH have net loss for the first time. Why is a company making losses pay dividend? This doesn’t even make sense. The only reason I can think of is to keep the older investors which relies on dividend payment. If SPH totally stop paying dividends, many investors (esp older people) will sell SPH shares.
Need to clarify (for general readers) to the points question poster and Chan Ze Ming made.
First of all, you need to understand the results they published. The operating cash flow (before changes in capital) for the year is 259 million (about 40 million less than prior year) = on cash flow basis they are still a profitable business.
The loss primarily comes about from change in fair value of investment properties (a decrease of 232 million) and 18 million in write-down and impairment. These are all non-cash. For people not in finance, this is like saying your shares, hdb and car are worth less now in current market conditions, if you were to sell them.
So now, given that they were cash flow positive, there is nothing wrong with paying dividends, even if it was from prior year earnings. Unless the business has concerns on cash requirements over the next few months.
its a bit like saying even though your hdb, shares and car worth less now, but I still got salary, and can afford to give angpow to my parents from the savings I had from last month salary.
For a company to continue paying dividends is a sign of the financial strength.
Would prefer SPH to not pay dividend to converse cash. IMO, any company paying dividends even when loss just dilutes the equity of the shareholders in term of retained earnings.
2 more comments
If I read correctly, as a group, SPH was still profitable. That is why they can still pay a dividend. So it's more accurate to say that their publishing arm is really bleeding.
Whether they can stem and reverse the trend or not remains to be seen. But if the group as a whole loses money, there will be probably be a sell off of sorts from the retirees.