In 2023, Keppel Ltd took bold steps to completely transform its business strategy, and as a result, its dividends have seen marked improvement. The company, known for its extensive work in the offshore marine sector, decided to spin off this substantial portion of its portfolio. This pivot has allowed Keppel to shift towards an “asset-light” model, much like Brookfield Asset Management, emphasizing recurring streams of income rather than heavy capital projects.
This strategic shift means that rather than relying on large-scale, capital-intensive ventures, Keppel now garners steady fee income from its assets. Just last year, this approach resulted in a substantial S$766 million in recurring income, making up a significant 72% of its net profits. Furthermore, Keppel has been proactively divesting its non-core assets. This has provided the company with valuable capital to both trim down its debts and ensure consistent dividend payments to shareholders.
The market has clearly responded positively to Keppel’s revamped operations. Since hitting a low point in 2020, the company’s shares have increased by a remarkable 60%.
Given Keppel’s stature as a major conglomerate, this transformation deserves a closer look to understand precisely what has fueled this recent surge in growth.
