Hyflux announced its half year financial results last month. For holders of Hyflux preference shares and perpetual capital securities (perps), perhaps the most noteworthy point is that it did not declare an interim dividend on its ordinary shares. Why is this important? It is because the payment of a preference dividend or perps distribution is discretionary. If certain conditions are met, the company can choose not to pay or only pay partially any preference dividend or perps distribution. One of these conditions is that a dividend on the ordinary shares is not paid out. The conditions for preference shares and perps are different, so let's discuss these separately.
Preference Shares
There are 2 conditions upon which Hyflux can choose not to pay or only pay partially its preference dividends. The 2 conditions are:
- If it does not have sufficient Distributable Reserves; or
- If it does not pay its next dividend ...