Santos Limited’s (ASX:STO) Board approved a new Dividend Policy so that it can provide sustainable returns to its shareholders. Santos will focus to pay ordinary dividends that will be sustainable through the oil price cycle and will target a range of 10 to 30 per cent pay-out of free cash flow generated per annum. Santos has been working on a strategy to establish a low cost operating model which is designed to deliver strong cash flows through the oil price cycle. While determining the appropriate dividend payment, the Board will consider the company’s growth profile, its cash flow status, balance sheet position, funding requirements, capital structure and franking credit balance. It will be totally Board’s discretion that how much to declare and pay.
The Board is also considering delivering additional returns to shareholders by keeping in mind the cyclical nature of the industry and will have above the ordinary dividend if business conditions permit. The Group is on track to achieve its net debt reduction target in the second half of 2018, that is more than a year ahead of schedule. Further, it has a significantly stronger balance sheet to support the company’s growth strategy which in turn positions the company to return a sustainable dividend payment to shareholders.
It has been observed that since 2016, Santos has already successfully executed the Transform phase of the strategy to simplify the company so that it can focus on five core long-life natural gas assets and can reduce costs which will help it to increase efficiencies to become Australia’s lowest cost onshore operator. This will strengthen the Balance Sheet and if market conditions remain supportive and the company continues to make good progress to its debt reduction target ahead of plan, the Board will plan to restore dividends to shareholders when it considers the 2018 half-year financial results in August. STO stock price went up by 2.2 per cent and was trading at $6.255 (as on 28 June 2018; 15:00PM AEST).
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