PLDT dividend policy gets mixed reviews from credit watchers

MANILA, Philippines - The dividend policy of Philippine Long Distance Telephone Co. (PLDT) has earned praises anew from a Hong Kong-based financial publication but at the same time drew flak from New York-based credit rater Moody’s Investors Service.

PLDT was recently cited with the Most Consistent Dividend Policy among publicly-listed Philippine companies in the 3rd Annual Southeast Asia Institutional Investor Corporate Awards by Hong Kong-based investor publications Alpha Southeast Asia Magazine.

The award was based on the votes of independent investors and analysts surveyed by the regional publication.

PLDT chairman Manuel V. Pangilinan said the company is honored and gratified that its efforts to deliver value to customers and shareholders have again been recognized.

“Despite intense competition and the profound changes taking place in the telecoms industry in 2012, PLDT paid out 100 percent of its 2012 core earnings per share as dividends to shareholders, making it the sixth consecutive year of 100 percent payout,” Pangilinan said.

This is the second year in a row that PLDT was cited by Alpha Southeast Asia Magazine for its dividend policy. The institutional investment magazine said PLDT was one of the largest dividend payers on a per share basis and the third largest dividend payer among companies in Southeast Asia in last year.

Earlier this year, PLDT also received recognition for its commitment to a consistent dividend policy from Hong Kong-based financial investment magazine FinanceAsia.

Alpha Southeast Asia is a Hong Kong-based publication which is the first and only institutional investment magazine primarily written for institutional investors, asset and fund management companies in Hong Kong, Singapore, other parts of Asia, US, Europe and the Middle East.

The publication is headquartered in Hong Kong but with bureaus and correspondents in various Southeast Asian capitals such as Jakarta, Kuala Lumpur, Manila, Singapore and Bangkok.

On the other hand, Moody’s assistant vice president and analyst Yoshio Takahashi said in a statement that the rating of PLDT is constrained by the high dividend payout ratio and the perceived increase in the company’s investment appetite.

Takahashi said Moody’s expects PLDT’s adjusted debt/EBITDA to remain in the range of 1.5 times to two times in the next two years as it is likely to maintain a 100 percent dividend payout ratio, comprising a 70 percent regular dividend and 30 percent special dividend.

Moody’s said the adjusted consolidated EBITDA margin of PLDT is likely to stay at around 50 percent due to its strong market positions in the fixed-line, broadband, and cellular services businesses in the Philippines.

Takahashi pointed out that Moody’s would consider upgrading PLDT if it maintains adjusted consolidated EBITDA margins of over 45 percent and lowers its adjusted consolidated debt/EBITDA to below 1.5 times on a sustained basis.

He added that PLDT would have to ensure that shareholder returns and asset investment policies do not substantially weaken its financial profile.

In October last year, Moody’s upgraded the local currency issuer rating and foreign currency bond rating of PLDT by one notch to Baa2 or a notch above the minimum investment grade from Baa3 or minimum investment grade. The ratings outlook is stable.

PLDT has earlier earned the distinction of being the first Philippine corporate to be given investment grade credit ratings by all three major international credit watchers – Moody’s, Standard & Poors and Fitch Ratings.