The News Corp press is reporting that analysts at U.S. investment bank JP Morgan have run the ruler over Telstra Corporation Ltd's (ASX: TLS) future cash flows and come out with some worrying conclusions for shareholders.
The telco will hand down its profit report next week with some analysts including JP Morgan expecting it to maintain its 15.5 cents per share payout to take FY 2017's total dividends to 31 cents per share.
However, JPM (like other professional analysts) expects Telstra will significantly cut its dividend in FY 2018 as it faces a "loss c.$2.5 billion in EBITDA once the NBN is rolled out" as government payments as a quid pro quo for the NBN cease.
As a result, JPM expects Telstra to pay just 28 cents per share in dividends next year, which means it offers an estimated yield around 6.7% when selling for $4.14 today. It looks like the market agrees that Telstra's dividend is set to fall and JP Morgan is reportedly warning that earnings could be 30 per cent lower or worse by 2022. You can count me out as a buyer of Telstra shares for income. Especially when there are so many other businesses with potential to grow their dividends….
