The world's second largest maker of aircraft engines had alerted investors to the risk to its dividend in November, when it said it was putting the payout under review amid a further deterioration in its markets.
Rolls-Royce said it would pay shareholders a final dividend of 7.1 pence per share compared to the 14.1 pence it paid out last year, a bigger reduction than the 25 percent cut analysts had been expecting.
For 2016, Rolls-Royce said it continued to expected a profit headwind of 650 million pounds.
It reported underlying pretax profit of 1.36 billion pounds last year, a drop of 16 percent from 2014, and in line with a consensus forecast.