WOOD Flash – OTE: unveils new shareholder remuneration policy, will pay total EUR 260m (4.5% yield) this year

OTE’s announcement of a (long-awaited) shareholder remuneration policy is certainly positive for the stock, and this year’s total expected yield of 4.5% – of which 2.9% from a cash dividend and the balance in share buybacks – puts it right in line both with the average 4.5% yield expected for our EMEA peer group and the 4.4% for its developed peers. That said, going forward, the new policy leaves management with a wide latitude on both its projected current year FCF and with expected spectrum and one-off payments, which makes projecting payouts for future years more difficult than estimating from historic results. It could also encourage management to be conservative with its guidance, which will feed into analyst estimates (and it does not seem there is a way that shareholders can “reclaim” FCF if the company outperforms its projections).
We are HOLDers of OTE at its current levels in view of the still elevated capex for vectoring in Greece and to a lesser extent in Romania, and the flattening growth trend in the core Greek fixed business (slower RGU adds, ARPU erosion accelerated), driven by the maturation of the pay-TV market and the continued weak results, on the whole, from the international operations. Nonetheless, we believe the company should be able to comfortably sustain the current yield going forward, with the risk rather to the upside.