Q: In a response to Marco today you indicated that BCE has a 12 month trailing cash flow of 7.6B, compared to dividends of 3.7B. Does this imply a payout of just under 50%, or am I missing something? I thought BCE's payout was well over 100%. If the 50% figure is correct, why all the concern about a dividend cut? Please clarify.
Thank-you
Thank-you
5i Research Answer:
In our answers on payout ratios, for consistency, we typicall reference operating cash flow and this is what we did in the prior answer. But for companies that have a lot of capital expenditures, some reference to this should be noted. Investors are concerned on the dividend because BCE does need to spend money on its network. For many companies, capex is somewhat discretionary. For BCE, to stay competitive, some of this spending is less discretionary. So there are some nuances here. BCE has taken steps to lower debt and reduce costs. In the past year, BCE spent $4.1B on the acquisition of fixed assets. If we include this figure, the payout ratio does become much tighter, of course.