Telefónica drastically cuts its historic dividend policy to save €870 million over two years in preparation for acquisitions

Telefónica plans to make a historic shift in its dividend policy as part of its new strategic plan, with cuts for 2025 and 2026. According to Bloomberg , the company will reduce its dividend yield from 6.6% to 4.8% in 2025 and 5.2% in 2026, which would have an impact of €870 million if the group's share price remains stable.

Telefónica has been paying €0.30 per share since the 2020 cut due to the coronavirus pandemic. In a sign of the company's shift in direction, the previous management promised in 2023, when presenting its new strategic plan, that the dividend would be "at least €0.30 until 2026," even opening the door to an increase in one of the most generous dividends on the Ibex 35 and in the European telecommunications sector. Now, if the current situation persists, the payout will be €0.216 in 2025 and €0.234 in 2026 .

The direction is different, and the goal is to align it with the rest of the European telecommunications sector . The bar set by the Spanish operator places it above the prices paid by BT, Vodafone, and Deutsche Telekom , and below those of Orange .

The main impact on investors will be felt by the group's largest shareholders. The State Industrial Holdings Company (SEPI), Criteria Caixa , and the Saudi group STC will each forgo approximately €85 million over two years, while BBVA will lose around €42.5 million. Obviously, Telefónica's new roadmap is being launched with the aim of increasing its share price, so the final payouts could be higher if the share price rises and the group's financial situation improves.

Another factor supporting the dividend cut is that Telefónica's generosity hasn't translated into significant stock market performance compared to its European peers. In fact, this year the group is lagging behind its competitors , with a 9% increase compared to Vodafone's gains of over 30% and Orange's gains of over 40%. Shares in the Spanish company fell 1.81%, reflecting the group's decision ahead of the presentation of its strategic plan, which will now be launched on November 4th with a potentially stronger stock market outlook.

With this decision and the sale of its non-strategic operations in Latin America—including its exit from Ecuador, which was finalized early yesterday morning—Murtra has generated a profit of over €3 billion . Two potential acquisitions in the sector are also in the pipeline: the purchase of Vodafone Spain or 1&1 in Germany . Other acquisitions could be pursued to expand into areas such as cybersecurity and auditing.