Telefónica is valuing to eliminate or reduce its dividend of 0.30 euros per share, as reported VOICE. The measure would be part of the Strategic plan that Marc Murtra will present on November 4 and that seeks to obtain liquidity to finance acquisitions in Europe.
Why is it important. This movement would mean the end of an era for Telefónica and its shareholders.
- The Teleco has been considered a “dairy cow” for investors seeking dividend profitability, especially those of senior age and traditionalist profile, and conservative funds.
- Deleting this remuneration would mean betting everything to technological transformation and growth. And the end of a stage for the Matildes.
In figures. Telefónica annually allocates about 1.7 billion euros to the payment of dividends. According to Bank UBS, eliminating this game would reduce leverage 0.18 times a year. That is, not distributing dividends would allow Telefónica to reduce the pressure it has for its still high debt to its benefits.
The action has revalued 12% since the arrival of Murtra in January, but follows 83% below its historical maximums in 2000, and 80% from the peak prior to the 2008 crisis.
The context. The operator needs financial muscle to execute its European consolidation strategy. Murtra wants to create a “European champion” through acquisitions, With Vodafone Spain in the spotlight as he anticipated Expansion.
However, these operations require billions that the company does not have years of desireing. Zegona bought Vodafone two years ago for 5,000 million euros and will want to get a benefit to a hypothetical sale to Telefónica.
Between the lines. Several investment banks have recommended this measure to Murtra, a sign of consensus in the financial sector about their need. The proposal breaks with decades of tradition in a company where shareholders such as Criteriacaixa and BBVA have historically based their confidence on “the remuneration strategy.”
Yes, but. If this measure ends up, it will not be extraordinarily popular, not even internally. Pallete already reduced the dividend from 0.40 to 0.30 euros in 2021 To reduce debt, and maintain it has been an implicit promise. Bank of America considers “complicated” the passage through this prior commitment, although not impossible.
The decisive moment. November 4 will be the key date. Murtra must convince the market to sacrifice the dividend will generate a higher future value.
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