Singtel could cut ‘unsustainable’ dividend rate
Singtel may cut its "unsustainable" dividend rate to between 13 and 15 cents a share in the next financial year in order to maintain its credit rating, said DBS Equity Research yesterday.
The telco has either maintained or raised its dividend every year for the past two decades.
Its total dividend was 17.5 cents a share in the financial year ended in March, and it expects to maintain this rate this year, barring unforeseen circumstances.
Singtel's policy states it "is committed to delivering dividends that increase over time with growth in underlying earnings, while maintaining an optimal capital structure and investment-grade credit ratings".
Earlier this year, Standard & Poor, Moody's Investors Service and Fitch Ratings all revised Singtel's outlook to negative.
DBS said yesterday that it expects Singtel to report core EBITDA (earnings before interest, tax, depreciation and amortisation) margins of below 30 per cent over the next two years.
It cited pricing pressures in the Australia and Singapore mobile markets and growing contribution of low-margin information and communications tech service businesses to its enterprise segment.
Singtel's net debt-to-adjusted EBITDA would also remain at over two times if it maintained its current "unsustainable" dividends levels, it added.
IHS Markit senior research analyst Wong Chong Jun said Singtel is unlikely to cut its dividend next year, noting that its ability to generate strong free cash flow has allowed it to support its payouts. - THE STRAITS TIMES