With Telstra Corporation Ltd (ASX: TLS) suffering from increased mobile phone competition and the ongoing impact of the National Broadband Network, cutting dividends is one of the few options available according to the analysts. Telstra has already cut its dividends from 31 cents a share to 22 cents a share for FY18 and FY19.
But, with lack of solutions to make up for the falling earnings, cutting dividends may be the only way to support the company as there is already a $3 billion commitment to upgrading the network.
The shares are at a seven year low but could go lower if further dividend cuts are made. The share price was down 2% at the time of writing to $2.75, trading on a forward price-earnings-ratio of 9x.
Vocus Group LTD (ASX: VOC) competing in the same industry as Telstra has come off nearly 3% today despite the positive response to the new MD and CEO announced yesterday.
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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 and Vocus Communications 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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