Investors’ reaction towards Telefonica explains why profit is not always the main driver of share price. The Spanish firm’s stock price fell by more than 1% during the opening of yesterday’s session, but quickly rebounded after Telefonica’s chairman, César Alierta, underlined his commitment to shareholder remuneration. The share price closed at 13.80 euros (+ 1.70%), the highest value since 2011, showing an overall increase of 16% per cent so far this year.
Along with the stock’s strong performance, a payment of 0.75 euro dividend per share was announced for 2015 and 2016 to be paid next year. This is not an exceptional case in the Spanish stock market. Remuneration to shareholders of companies that operate on the Ibex grew by 89% in 2014 and, according to experts, could set a new record this year.
At first glance, Telefonica’s results seemed negative, worse than market predictions with net profit of €3 billion euros, which represents a fall of 34.7%, and an Ebitda decrease of 19% to €15.515 billion. The figures can be attributed to several extraordinary factors such as the devaluation of the Bolivar in Venezuela, the provision for restructuring costs and the adjustment of the group’s valuation.
The operator’s results assessment changes when variables are analysed such as debt reduction- €31.705 billion when the planned sale of O2 in the United Kingdom is finalised- and the debt ratio which has stayed at x2.15, which is in line with the company’s target.
Other positive aspects to note are the improvement of Telefónica’s Spanish business, the company’s strong organic growth in Latin America and the strong performance of their investments in two main markets- Brazil and Germany.