I couldn't find an answer for this question, so I hope it isn't a repetitive one. If so, my apologies.
Given that BCE will cut the dividend (even if just for argument's sake), what will be the impact on the share price? In your experience, does the size of the dividend cut generally equate to a similar sized rebound in price, or a fraction thereof? If a 50% dividend cut, what might be the potential rebound compared to a complete elimination of the dividend?
And, finally, any sense of when the board would want to have that decision made?
Many thanks for your insights - much appreciated, as always!!
Cheers,
Mike
It is a tough question. We have seen stocks rise with a dividend cut, but has also seen them plummet. In a situation like this, with investors very worried, we would not expect a pro-rata reaction. A 50% cut we think might not impact the stock much at all. Essentially, currently it is what investors WANT, and thus may be priced in. We think more than 50% would hurt the stock 10% or so (guessing here). Less than 50% might as well to a lessor degree as we think investors want the company to make a stance here about cutting costs and debt and growing again. The more cash that goes to the dividend, the less debt can be paid down or used for growth initiatives. The last question is harder. Last year the board said no cut. They could have cut this week with the earnings release. Now, they have said 'review' which is often a prelude to a cut. We are not sure what 'new' information the board is going to get. Maybe they wait until tariffs are official or not. But we would be surprised if no decision is made one way or the other by mid March. It is not that tough a decision, really, since everyone expects a cut anyway.