Are Keppel’s dividends truly unsustainable – or just misunderstood?

​[SINGAPORE] The recent clash between Keppel and activist research firm Corporate Monitor highlights a vital question for investors: Are the dividends from the restructured Keppel truly sustainable?

​The activist report pulled no punches. It argued that Keppel’s payouts are a mirage, funded by selling off assets rather than by generating operating cash flow.

Pointing to a gap between reported profits and operating cash flow, Corporate Monitor painted a picture of a heavy balance sheet masking underlying weakness.

At Keppel’s recent annual general meeting, these hard questions – fielded by proxies for Corporate Monitor – also dominated the floor.

​To judge the fairness of this critique, we must look at the blueprint of Keppel’s Vision 2030.

The activist argument judges Keppel by the metrics of a traditional industrial conglomerate. If a legacy builder relies on asset sales to fund its dividends, warning bells should rightly ring.

But ​Keppel has changed its identity. It has transitioned into a global asset manager and operator. In this new space, asset monetisation is the core operating engine.

Through sponsor stakes in and co-investments with its own private funds or affiliated real estate investment trusts, Keppel develops real assets, stabilises them, and then sells them.

“As an asset manager and operator, Keppel’s cash-generation sources include both operating and investing activities,” a company spokesperson said in response to queries from The Business Times. “It is incomplete to look at Keppel’s cash flow just from the perspective of ‘cash flow from operations’.”

Besides recurring distributions supported by the underlying operating cash flows, the assets owned by its private funds typically see valuation uplift over the development cycle. Value realised on divestment and proceeds distributed back to Keppel contribute to its investment cash inflows.

“Despite investments and capex of S$5.4 billion from 2021 to 2025, the company generated free cash inflows cumulatively over the same period of approximately S$1.7 billion,” the spokesperson said.

The way Keppel sees it, to look only at cash flow from operations is hence “inadequate and misleading”.

Similar pivot, different paths

​We can see the mechanics of this strategy clearly by looking at another local giant that successfully made a similar pivot: CapitaLand . ​Both companies made a big change to become global asset managers.

CapitaLand paved the way in 2021 when it listed its investment arm. It uses its balance sheet to start real estate projects and then sells them to its private funds or trusts to earn fees. Keppel is building the same engine, but it focuses on energy, green tech and digital assets.

​The main difference is in how they deal with their older, heavy assets.

CapitaLand made a clean split. It took its heavy development business private and listed only the asset management side. Keppel took a different path; it kept its older assets on its books.

Keppel created a set-up where its new business drives regular income, while it slowly sells off the older, non-core assets. This makes Keppel’s balance sheet look heavier, as if it carries more debt than CapitaLand’s right now. This relatively heavier debt is the main reason for the complaints from Corporate Monitor.

​Critics rightly point out that the group still carries a heavy legacy burden. Keppel has S$13.5 billion tied up in non-core assets. The overall ratio of group net debt to earnings before interest, taxes, depreciation and amortisation remains high.

However, Keppel’s leadership has clarified that the debt profile of New Keppel is far healthier. The heavier debt load sits squarely with the legacy assets, which the company is actively working to clear by 2030.

​The company’s dividend policy directly reflects this dual approach. To provide clarity to the market, management has drawn a clear line between its core operations and its legacy portfolio.

The ordinary dividend is funded by the performance of “New Keppel”, which is underpinned by recurring income.

In 2025, a robust 86 per cent of New Keppel’s net profit was recurring. This gives the ordinary payout a strong, reliable foundation, much like the fee-based income that anchors CapitaLand Investment.

For FY2025, Keppel proposed an ordinary dividend of S$0.34 per share, comprising a final dividend of S$0.19 per share and an interim dividend of S$0.15 per share.

​The special dividend is handled differently. Keppel has a set policy to pay out 10 to 15 per cent of the gross value of asset monetisation transactions completed in the financial year.

For 2025, the company announced approximately S$2.9 billion in divestments and completed S$1.6 billion in transactions to unlock capital, reduce debt and fund growth. This drove a proposed special dividend of roughly S$0.13 per share.

This explicit link between asset sales and special payouts removes the guesswork for investors. It provides a transparent framework for the duration of the monetisation programme.

In the year to date, Keppel has announced S$385 million in asset monetisation, with a target to monetise S$2 billion to S$3 billion of non-core assets in 2026.

Transformation in progress

Understandably, transforming a massive legacy balance sheet takes time. But the first quarter of 2026 provided encouraging signs that the transition is gaining traction.

Keppel reported that it had returned to a free cash inflow position – recording cash inflows from both operating and investing activities, compared to outflows in the corresponding quarter the year before.

Asset management fees rose 13 per cent year on year to S$108 million in Q1 2026, even as overall net profit was lower on fair value losses and lower monetisation gains from the non-core portfolio.

The company is closing in on its target of S$100 billion in funds under management ahead of its 2026 deadline. Looking further ahead, the group aims to double that figure to S$200 billion by the end of the decade.

​The market has largely validated this strategic pivot.

Keppel’s shares have rallied strongly over the past year. Investors were rewarded with a total shareholder return – with dividends reinvested – of 58.5 per cent in 2025.

Sell-side analysts remain overwhelmingly positive on the stock. They view the regular asset sales as clear catalysts for unlocking value.

​Asset recycling inherently produces lumpy cash flows. There will be quarters where divestment gains skew the numbers. There will be periods of heavy capital expenditure as new seed assets are developed.

The upcoming Keppel Sakra Cogen Plant, for instance, requires significant upfront investment. But it will eventually provide contracted, recurring revenue before potentially being offered to investors.

​The activist critique performs a useful function. It demands accountability and rigorous accounting. The questions regarding the carrying value of legacy assets and the pace of the wind-down are entirely valid.

Management will need to maintain strict discipline to ensure that the non-core portfolio is monetised at fair valuations. ​But to conclude that Keppel’s dividends are unsustainable is to ignore the stated mechanics of its business model.

The company has laid out a clear road map. The recurring income from its asset management and operating platforms secures the base dividend, while the managed unwinding of its legacy assets funds the special payouts.

​This is a multi-year transformation taking place in full view of the market.

The transition from heavy industry to asset management is inherently messy in its middle phases. But the underlying financial engine is working as designed.

For investors willing to accept the asset-light premise proven by peers, Keppel’s current payout structure offers a credible bridge to the future.