Reuters (News 
- Alert) is reporting today that Spain's Telefonica (News - Alert) plans to cut dividends in what it calls an “aggressive” attempt to correct its debt ratio. Officials blamed market conditions that have changed “significantly” as well as the ongoing European debt crisis for the change.
“We set our previous dividend policy back in October 2009 when market conditions were very different than today’s,” said Telefonica's Finance Chief Ange Vila during a conference call today. “Markets haven’t clearly recognized our shareholders’ remuneration efforts and we realized we need more flexibility.”
The company said today that it will pay 1.50 Euros per share in dividend during 2012. This is down from the 1.75 Euros per share dividend previously planned. Telefonica says it will maintain this 1.50 Euros per share dividend through 2013. Telefonia maintained a dividend of 1.60 Euros during 2011.
The changes are due to the company's intent to keep its debt ratio between 2.0 and 2.5 times operating income before depreciation and amortization (OIBDA), it said.
“It was inevitable that at some stage they would have to cut it,” Guy Peddy, an analyst at Macquarie Securities in London, told Bloomberg (News - Alert) today. Peddy has an “outperform” rating on Telefonica. “It’s the timing that is a surprise rather than the event itself,” he said.
Telefonia, which is based in Madrid, is Spain's largest telephone company. During the conference call, Vila also said the company intends to sell some assets.
Tracey Schelmetic is a contributing editor for TMCnet. To read more of Tracey's articles, please visit her columnist page.Edited by
Rich Steeves
