On one hand I agree with the worries of Dividends being higher than FCF and in the long term, it does not look sustainable.
On the other hand, I don't think this is a chronic issue as I see growth avenue for the company in the future with the data centre business unit and a worldwide optimism coming with the interest rates and inflation coming down, which highly likely will lead to higher revenues (apart from its recent fare adjustments for services provided), lower cost of debt. Not to mention that the company has a strong brand in NZ and significant market share with plenty of other opportunities to grow.
Currently it is trading at circa 10% dividend yield (500M per year) and their FY25 guidance for FCF is around 400-440M. Based on that, I ran some rough some rough calcs and scenarios.
My conclusion is: It does not look the end of the world for me to be buying a company that in the worst case scenario will be paying 6% (missing FY FCF by 20M and paying 80% of the FCF as divs - their capital management policy states 80-100% of FCF as divs). And for NZers, these dividends are franked? For me, it is definitely a buy! It appears that the market is over worried with FCF < Div pay out, but I see this more as transitionary thing rather than chronic - if this persists for 2-3 years, it would be more of a concern for me. I had a check on the previous reports and the summary is below
GLTA ; DYOR
(20min delay)