Endangered Dividends
Where Dividend Cut Risk Lies in 2025
By
Roger S. Conrad on
Jan. 9, 2025
Last year, seven companies in the Conrad’s Utility Investor coverage universe cut or eliminated their dividends. They were: Algonquin Power & Utilities (TSX: AQN, NYSE: AQN), Innergex Renewable Energy (TSX: INE, OTC: INGXF), SSE Plc (London: SSE, OTC: SSEZY), Superior Plus (TSX: SPB, OTC: SUUIF), Telephone and Data Systems (NYSE: TDS), Uniti Group (NSDQ: UNIT) and Vodafone Plc (London: VOD, NYSE: VOD).
When Dividend Cut Risk is Overstated
By
Roger S. Conrad on
Dec. 9, 2024
Nothing alarms income investors more than fear of dividend cuts. So accusing a trusted company of nearing one is a time-tested way to get attention—whether you’re a Wall Street analyst or a Seeking Alpha blogger. BCE Inc (TSX: BCE, NYSE: BCE) and Eversource Energy (NYSE: ES) are recent targets of dividend cut speculation. But unlike the trio of companies currently on the Endangered Dividends List, actual risk is far less than it may first appear.
Two Dividend Cuts and a Likely Third
By
Roger S. Conrad on
Nov. 11, 2024
Just weeks after raising its final dividend for FY2024 (end June 30), Spark New Zealand Ltd (NZ: SPK, OTC: SPKKY) announced a -9.1 percent cut in its FY2025 dividend.
Last month, I noted management’s dour forecast for FY2025. And it’s now doubled down on that outlook, cutting EBITDA guidance to a range of NZD1.12 to NZD1.18 billion from the previous NZD1.17 to NZD1.22 billion. The telecom also cut its planned capital expenditures to NZD415 to NZD435 million, versus previous guidance for NZD460 to NZD480 million.
Telecom Dividends in Danger
By
Roger S. Conrad on
Oct. 3, 2024
During the first nine months of 2024, 116 essential services companies tracked in the Utility Report Card raised dividends at least once. Eight reduced or eliminated their payouts, disproportionately from the telecom sector. Telephone and Data Systems (NYSE: TDS) cut its payout -79 percent. That reflects the proposed sale of wireless operations of its US Cellular Corp (NYSE: USM) affiliate to T-Mobile US (NSDQ: TMUS) for $4.4 billion.
Algonquin Cuts, But It Should Be the Last Time
By
Roger S. Conrad on
Sep. 9, 2024
Regulated utilities aren’t immune from stumbles. And Algonquin Power & Utilities (TSX: AQN, NYSE: AQN) negatively surprised me in early August, with its second dividend cut in 18 months. When a company reduces guidance multiple times in succession, it’s clear management did not fully anticipate business headwinds. And usually the best course for investors is to move on.
Telecom Dividends at Risk
By
Roger S. Conrad on
Aug. 5, 2024
Uniti Group (NSDQ: UNIT) now expects to close its proposed merger with privately held Windstream Holdings in “second half 2025.” At that time, management has said it will drop its REIT structure and eliminate its dividend.
This implies the company will make at least four more payment at the current rate of 15 cents per share—one-year income return of almost 15 percent. But lest anyone be tempted, consider the following.
Why NextEra Energy Partners Won’t Cut
By
Roger S. Conrad on
Jul. 8, 2024
Most companies view dividend cuts only as a last resort. That’s for good reason.
Investors rightly view slashing payouts as management breaking faith, even when there are very good reasons. Just ask Kinder Morgan Inc (NYSE: KMI) founder and largest shareholder Richard Kinder. His stock sells for half what it did in late 2015 before the midstream company cut dividends by 75 percent, despite a 130 percent increase since.
More Telecom Cuts
By
Roger S. Conrad on
Jun. 10, 2024
Only three US communications companies have avoided dividend cuts since 1996 Deregulation: Giants Comcast Corp (NSDQ: CMCSA) and Verizon Communications (NYSE: VZ), and specialty fiber broadband service provider Cogent Communications Holdings (NSDQ: CCOI).
Last month, small town-focused Telephone & Data Systems (NYSE: TDS) slashed its quarterly dividend from 19 cents to just 4 cents per share. The -79 percent cut reflects the proposed sale of wireless operations and related spectrum by the company’s 72.66 percent-owned US Cellular Corp (NYSE: USM) unit to T-Mobile US (NSDQ: TMUS).
Uniti Group Buckles, UGI Corp Off the List
By
Roger S. Conrad on
May. 9, 2024
Debt remains the number one threat to essential service dividends. The latest to fall victim: Telecom infrastructure company Uniti Group (NSDQ: UNIT).
This month Uniti announced it will merge with privately held Windstream Holdings, its former parent and still largest customer by far. Management says the union will create the “premier insurgent fiber provider.” But this is really a cost-cutting and debt reduction deal: The companies target $100 million in operating expense cuts and “$20 to $30 million” in capital spending “synergies.”
Debt’s Still a Threat But Waning
By
Roger S. Conrad on
Apr. 3, 2024
In this month’s Utility Report Card, I highlight how companies stack up on each of our Quality Grade criteria. One big takeaway on balance sheet risk: Higher for longer interest rates are a much-diminished risk to dividends.
Companies are still paying more to refinance debt. But long-term borrowing costs are actually lower than where they began 2023 for most companies. And the result is the wave of debt offerings highlighted in URC comments, particularly of 10 years maturity and greater.
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