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Fitch: Dividend cut supportive of Telefonica's rating

Published 10/28/2016, 06:35 PM
Fitch: Dividend cut supportive of Telefonica's rating
TEF
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  • A dividend cut at Telefonica (MC:TEF +1.2%) is supportive of the company's credit profile and will help build headroom in its rating, Fitch says.
  • Along with earnings yesterday, the company cut its dividend to €0.55/share from €0.75/share, as it tried to fight a potential downgrade.
  • The company had €50B in net debt, above Telefonica's market cap. And the cut looks to have had the desired effect, at least at Fitch: The move shows "management's commitment to reduce leverage and will increase Telefonica's free cash flow and organic deleveraging capacity."
  • It will also reduce reliance on asset sales, the firm said. All told, Telefonica should retain its BBB rating at Fitch.

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