RE:RE:AnalysisRed_Deer wrote: This still justifies a BUY rating, especially with yet another dividend increase this quarter (yield is now 6.2%), but we now believe it will take until 2025 to get the dividend payout ratio under 100%.
Here is a QUESTION I Have Had for DECADES
Does AnyOne Know IF the PayOut Ratio TAKES INTO ACCOUNT All the DRIP Shares eh ???
The MORE Drip Shares = LESS Actual CASH PAYOUT
So IS THIS Taken Into Account in the PayOut Ratio eh????
THOUSANDS of Telus ShareHolders ARE Taking DRIP__INCLUDING of Course ENTWISTLE
T's dividend payout ratio metric does take into account the DRIPs.
In the recent quarter's MD&A document, it shows:
$2063M in dividends paid for the last 4 quarters
less $748M in DRIPs = $1315M net dividends paid out in cash
and $1492M in Free Cash Flow
$1315M / $1492M = 88% Dividend payout ratio
or over 138% if you do not include the DRIPs
Some additional analysis:
The dividends being paid out every year is currently growing by about $200M annually so I'm guessing the dividends paid out in 2024 will be about $2200-2300M or about $1450-$1500M proportionally minus the DRIPs.
Starting with original 2023 FCF guidance of $2000M, it was reduced to $1500M after TI's miss and the expanded restructuring/layoffs (+$475M which is most of the FCF reduction) and is supposed to yield $325M in annual savings. In the earnings call, they seemed to have said some of that $475M may bleed into Q1 2024 with the full runrate of the $325M in annual savings starting in Q2 2024.
T can get back to ~$2000M FCF by not repeating the $475M expanded/addition restructuring. I also suspect there will be even less base restructuring in 2024 vs 2023 because they likely had to do all the originally planned Lifeworks and Willowtree acquisition layoffs in 2023. Add about 3/4 of the $325M in annual savings from the layoffs, it gets FCF to about $2240M. Add $100M for the one-time union contract signing bonus paid in 2023 but not in 2024 to get FCF to $2340M.
Additional positive variables will be: synergies from the Lifeworks integration and general revenue growth. Possible negative variables might be higher interest rate payments and whether TI can get its act together.
In the Q&A of the earnings call, they suggested that the dividend payout ratio (using their metric which substracts the DRIPs) will be in the low 60% in 2024 and beyond. Using my estimates for 2024: $1500M / $2340M = 64%