Sanlam’s dividend policy makes a clear distinction between operating earnings (net result from financial services), which is the key driver of dividends, and investment return earned on the capital portfolio. The level of capital allocated to the Group’s operations is determined to ensure that regulatory solvency levels will be maintained within a set target range, taking into account potential volatility in investment market returns. The key features of Sanlam’s dividend policy, and the interaction with discretionary capital, can be summarised as follows:
We follow a prudent approach: we only use free cash flow to fund dividends Our dividend philosophy is embedded in our capital management approach – we therefore do not manage our capital and solvency through our dividend policy.
We maintain a cash dividend cover ratio of between 1,0 and 1,2 times to manage smooth real dividend growth of 2% – 4% per annum
The Group only declares an annual dividend due to the costs involved in distributing an interim dividend to our large shareholder base. Sustainable growth in dividend payments is an important consideration for the Board in determining the dividend for the year. The Board uses cash operating earnings as a guideline in setting the level of the normal dividend, subject to the Group’s liquidity and solvency requirements. Dividend cover of cash operating earnings is managed broadly within a 1 to 1,1 times range to target consistent real growth of between 2% and 4% in the Group’s normal dividend payment. The operational performance of the Group in the 2017 financial year enabled the Board to increase the normal dividend per share by 8% to 290 cents. This will maintain a cash operating earnings cover of approximately 1,1 times. The graph below provides an indication of cash operating earnings generation in 2017.
Most of the net result from financial services generated by the South African operations are available for dividends due to the mature nature of these businesses. The same applies for the developed markets earnings in Sanlam Investments. Sanlam Emerging Markets’ operations, however, retain a large part of their operational earnings for investment in future growth. As these operations mature over time, the cash generation will increase with a commensurate increase in cash available for Sanlam dividend payments.
The South African dividend withholding tax regime applies in respect of this dividend. The dividend does not carry any STC credits and will in full be subject to the 20% withholding tax, where applicable.
Shareholders are advised that the final cash dividend of 290 cents for the year ended 31 December 2017 is payable on Monday, 9 April 2018 by way of electronic bank transfers to ordinary shareholders recorded in the register of Sanlam at close of business on Friday, 6 April 2018. The last date to trade to qualify for this dividend will be Tuesday, 3 April 2018, and Sanlam shares will trade ex-dividend from Wednesday, 4 April 2018.
Share certificates may not be dematerialised or rematerialised between Wednesday, 4 April 2018 and Friday, 6 April 2018, both days included.