In a while where credit spreads are beginning to widen, Rogers Communications Inc. surprised the marketplace Wednesday if the made a decision to keep its quarterly dividend unchanged so that it could reduce its debt load instead.
Its class B shares tumbled 5.Four percent Wednesday, and fell further on Thursday.
Equity analysts suspect this decision reflects, partly, pressures inside the credit ratings agencies for Canadian telecom providers to return to normal borrowing metrics. A targeted leverage ratio for Rogers is between two and 2.4-times. Today, it operates at 3.1-times. Many firms have issued debt to understand from significantly lower rates C with the idea to stay older credit facilities or to fund infrastructure projects, spectrum purchases or general expenses.
Related
- Rogers Communications Inc shares fall after results miss expectations in ‘fiercely competitive’ Q4
-
-
-
“The organization may have chosen to check out BCE’s lead in issuing equity to reduce leverage,” Maher Yaghi, an analyst at Desjardins Capital Markets, wrote Thursday inside a note to clients. “However, recent price weakness may have reduced the benefit of that option.”
In the fermentation telecom industry, Yaghi says there’s an intensifying bet on tug of war happening between debt and equity holders not only at Rogers, but inside the entire industry. Shaw Communications Inc., that’s finally engaging in wireless, also kept its dividend payout unchanged if the posted earnings this month.
Following the production of the results, a handful of equity analysts trimmed their 12-month price targets for Rogers.
