BBVA, CaixaBank Revenue Hurt by Cut to Telefonica’s Dividend

Telefonica SA’s decision to cut its dividend will pare back a source of income for Banco Bilbao Vizcaya Argentaria SA and CaixaBank SA, the Spanish lenders that are its biggest shareholders.

BBVA, Spain’s second-biggest bank, and CaixaBank, the third-largest, are set to miss out on combined payments of about 54.5 million euros ($66.6 million) after the communications giant said Thursday that it would reduce its dividend to 30 euro cents per share from 40 cents.

BBVA owns about 281 million Telefonica shares, or a 5.1% stake, which will now generate about 84.5 million euros in dividend income, down from the 113 million euros it earned from the holding in 2020, according to Bloomberg calculations. CaixaBank’s 260 million shares will earn it 78 million euros, down from 104 million euros previously.

The dividend cut “comes despite a low 46% payout ratio, which may dent confidence in its shareholder remuneration policy,” Bloomberg Intelligence analyst Erhan Gurses said.

Read More: Telefonica Shares Gain Most in a Month After Results Please

Telefonica is cutting its dividend for the first time since 2016 to preserve cash after the pandemic exacerbated competitive pressures in its biggest markets. The reduction, widely-expected by analysts, will allow the Spanish carrier to put aside funds to pay off debt and invest in infrastructure.

Telefonica shares jumped as much as 5.7% in trading Thursday in Madrid, before paring gains to 0.2% as of 1:30 p.m. local time.

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.