Q: Telus just announced *approval* for an NCIB. How does this affect the thinking on possibility of a dividend cut?
If its free cash flow made it barely sustainable before, won't this additional use of funds make a cut even more likely? (Or will they issue more debt/equity?)
If its free cash flow made it barely sustainable before, won't this additional use of funds make a cut even more likely? (Or will they issue more debt/equity?)
5i Research Answer:
Telus is not obligated to buy its shares, and likely put the NCIB in place as a backstop. At some point, though, cancelling shares with a 9.5% dividend (after tax) will be a good capital allocation move, even if debt (with tax deductible interest) is used. We would not read anything into this regarding a possible cut or no cut in the dividend.