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Will Telstra Corporation Ltd cut its dividend?

Telstra Corporation Ltd’s (ASX: TLS) share price dropped below $3.00 yesterday, the lowest level in seven years. Falling 10% to $2.87 since the company lowered its earnings guidance on Monday. As reported in The Australian newspaper, Citi’s analyst said that Telstra needs to take drastic action to stop further damage. The declining returns from the core businesses may mean that Telstra cannot continue to pay 22 cents a share in FY19 and FY20, without breaching the upper limits of the payout ratio.

Macquarie analysts believe that the weaker earnings outlook will lead to Telstra’s dividend payments falling to 20 cents in FY19. UBS’s analyst is more optimistic and sees the 22 cents dividend being maintained at least for FY18 and FY19.

Telstra will provide further guidance in June on how it plans to plug the hole in earnings

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Motley Fool contributor Rosemary Steinfort owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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