Nick read on dividend25 Oct 2018 10:33
A bit about dividend from the transcript below
Andrew Lee:Okay, so we've -- thanks for that. We've talked through your kind of free cash flow generation and partly through your outlook. And it brings us onto the dividends. And so as we look at the Liberty deal and potential that increases your, your gearing and the direction of travel of your, your top line, some investors have got nervous about sustainability of your dividend, the dividend cover and the dividend growth. I wondered if you could talk about your confidence in, in covering and delivering the dividends.
Nick Read:Yeah, I think it's important to understand how the board think about the dividend cause the board own the policy. And the board have a very specific view. They look at that we, we every year announce how much the cumulative free cash flow long-term incentive plan of management is. So, the midpoint of that range is €17 billion for the next 3 years. So our incentives are tied to delivering €17 billion plus or minus either side in terms of our bonuses and performance.
So they look at €17 billion. Then they say, okay, the dividend is €4 billion a year. So let's call that €12, I'm rounding €12. So they say okay so you got €5 billion of head room to cover spectrum, because that free cash flow is before spectrum. €5 billion to cover spectrum. What is the long-term average of spectrum payments? €1.2 billion, so 3 years, €3.6. So they look at it as we are covered. Yes, we are paying fairly foolish at this point in time. Clearly with €17 billion in a year, one guidance of greater than €5.2, there's growth in the free cash flow profile. And that's driven by EBITDA growth, going back to the conversation we had about absolute costs coming down on a multiyear basis. So they say the dividends covered. We're confident in the dividend policy that we have.
Andrew Lee:Okay say --
Nick Read:And that remains the case. Sometimes there's the confusion with investors about the fact that yeah but hold on a minute, your dividend -- sorry your spectrum cost this year and next year is not going to be €1.2 because of 5G auction. And my point to investors is, that is a leverage balance sheet issue not a dividend policy issue. You should separate the two. Look at long-term average for spectrum. Then if you look at leverage, can I cover leverage? Just in the same breath cause it's better, you did the Liberty. We did the Liberty Global transaction. We said we are moving to 2.5 to 3 times leverage, given the profile and the stability and makeup of our business moving forward. The transaction took us to the upper end of that. When we were setting the 3 times goal or target, we said to ourselves, we understood the profile of 5G spectrum this year and next year. That was taken into account. And I would say that spectrum auctions are broadly going in line with our expectations, but it's, you know, we've still got some to go.
Then we said we will de-l
Sign In
Follow the stocks
