Telefonica SA's 2017 dividend eyed by wary futures traders

Telefonica SA's dividend is being eyed by wary futures traders who see the Spanish teleco potentially cutting its payment in a bid to bolster its credit rating.

Speculation on the future dividend by the debt-laden carrier follows the falling-through of plans to sell its British wireless unit, Bloomberg has reported.

The news agency noted a German futures contract measuring investor sentiment towards Telefonica's 2017 dividend had slumped 12% since June 23, when Britain voted in a non-binding referendum to quit the European Union.

Telefonica's 2017 payout has not been set, while lightly-traded futures on the company's planned 2016 payment of 75 euro cents ebbed 4% in Spain on Monday.

Bloomberg cited a well-placed source in reporting that chairman Jose Maria Alvarez-Pallete was open to reducing dividend payments if it was necessary to preserve cash, pay down €50.2bn in debt and keep the company's investment-grade credit rating.

No decision had been made on the dividend, the unnamed source was reported to have said. A Telefonica official declined to comment.

Madrid-based Telefonica scrapped its dividend in July 2012 when it faced a financial crisis in Spain.

“I wouldn’t dismiss that they reduce the 2017 dividend, which is what I have in my estimates. It would be a good sign as they could cut debt and maintain attractive profits" Andres Bolumburu, an equity analyst at Banco de Sabadell SA who recommends buying the stock, told Bloomberg.

“I don’t think they’ll cut the 2016 one,” he said. “They don’t have to pay the full cash part until at least April, so they have enough time find other options to deleverage."