Obviously the ‘covered’ dividend comment has raised a few eyebrows. Yes, I accept that traditionally most analysts have looked at EPS but I’ve always thought it only ever told part of the story and frequently could be very deceptive. I’ve always looked at the cashflow statements at least as much as the P&L and Balance Sheet - often the P&L statement can be the least useful of the 3.
In a small start-up, rapidly growing business where they are ploughing everything back into growing the business, yeah I want as decent a balance sheet as practical and a healthy P&L but, in such a business there’s a very good argument for not having any dividend at all.
FCF vs dividends in a mature business where the ‘product’ is becoming almost a commodity becomes much more important. Let’s face it, dividends are paid in cash so cash coming in to pay them is pretty useful. Writing up or down the value of assets on the balance sheet can generate huge P&L swings when nothing much has changed in the day to day business, but yes, FCF can be played with simply by delaying capital investment which isn’t always a good thing.
I merely suggested that, according to the numbers they reported (or the guidance) the free cash flow did cover the current level of dividends - whether is still would if(when?) they need to invest heavily for 5G is a different matter… the again all the providers need to invest heavily in 5G and the money has to come from somewhere so unless the whole industry can increase it’s income (prices? hard but who knows?) the 5G roll out could be pretty slow.
FWLIW I still can’t get 4G in my house. Passable 3G from O2, temperamental 3G from VOD (it’s usually OK at the front of the house but in and out at the back) with EE being non-existent, no signal whatsoever. I don’t know much about Three (independent network or piggy back of one of the others?) but it’s never ever worked so I haven’t tried recently.
I do believe the dividend is critical to the share price, mainly because of the massive presence of the income funds - if the divs goes or is drastically reduced that could provoke a tsunami of selling but, if the guidance is realistic, an accurate reflection of free cash flow having taken into account necessary investment, then the numbers suggest the dividend is sustainable.
ITDYA, sitting tight for the moment but very much wondering whether investment isn’t just a euphuism for ‘spend’ here - there’s no real return on the investment, much more money you have to spend just to keep up.