Wednesday, January 26

Telefónica dividend: better in cash than more shares

Telefónica has announced the execution of the second increase in paid-up capital charged to reserves in order to pay its shareholders through the scrip dividend (‘Telefónica Dividendo Flexible’), a modality that gives investors the option of receiving the dividend from the Jose María Álvarez-Pallete’s company in cash or new shares.

Specifically, the payment that now starts corresponds to the remuneration of 0.30 euros per share in 2021.

It will be paid in two installments: the first in December and the second in June 2022. Each of them will be about 0.15 euros (or, more specifically, 0.148 euros).

If you opt for cash, you can sell the rights on the market between December 1 and 15 (at the current listing price of about 0.1402 euros).

Sell ​​Telefónica’s rights in the market or to the company itself?

Another option is to sell those rights to Telefónica itself, a possibility for which compensation must be requested in cash before December 9.

Later, the remuneration would be effective on December 17, as announced by the company itself to the National Securities Market Commission.

Finally, if you choose to receive the shares (in a ratio of one new share for every 26 old ones held by the shareholder), they will start trading on December 27.

Given this information, many shareholders will wonder which modality interests them more: whether to receive the dividend in shares or in cash.

Collect the dividend from Telefónica in cash, better than in shares

In this regard, Bankinter analyst Elena Fernández-Trapiella advises the following: “We recommend receiving the dividend from Telefónica in cash transferring the rights to Telefónica and receiving 0.148 euros per share, which is equivalent to a dividend yield of 4 percent. Or sell the rights in the market, if the price is higher, which is not the case now and it would be an anomaly if it happened ”.

A less advantageous possibility is, in Fernández-Trapiella’s opinion, that of receiving the remuneration to the shareholder in shares: “The option to receive the dividend in released shares alleviates the cash outflow for Telefónica, but supposes a dilution that can reach up to 3.85 percent of the capital and makes it more expensive for the group to maintain the dividend per share in the future (as there are more shares to remunerate) ”.

In any case, these options are only available to investors who are already shareholders of the former state telecommunications monopoly since December 2 was the deadline for them to appear as shareholders entitled to receive this dividend (for which, they should have formalized the purchase, at the latest, on November 30 and provided that the operation is registered before December 2).

On December 9, the deadline to request the cash dividend ends

The next reference date in this entire process is December 9, when the deadline to request cash compensation from Telefónica ends.

The shareholder compensation policy for 2021 was approved at the Telefónica General Shareholders’ Meeting held on April 23, 2021.

The shareholder remuneration policy and, specifically, the payment of dividends, is always one of the characteristics that investors most look at when investing in a company.

This is especially accentuated in the Spanish ‘blue chips’ such as Telefónica or the main banks in the country, which have used this issue to retain their shareholders.

Therefore, it is a sensitive issue that investors are closely monitoring.