TalkTalk is set to ditch its dividend following recent cyber security breach
Crisis hit home broadband company TalkTalk is expected to axe its dividend this week when it reports half year results on Wednesday.
The company’s finances are under fierce scrutiny following a cyber security breach which compromised the personal details of over 150,000 customers.
"It's more about the signal this sends,” XTB director Joshua Raymond warned on the potential dividend cut.
“Shareholders have been loyal because of the dividend. But let's face facts, any shareholder with a long term view needs to see why a cut to the dividend makes sense right now, but they need to buy in to the turnaround story too, which is a bigger challenge,” Raymond added.
The company had previously promised to raise the dividend this year.
Michael Hewson, chief strategist at CMC Markets, said: "Given TalkTalk’s current problems the axing of the interim dividend is probably the least pressing concern.
"The viability of the business needs to be the primary concern and if the dividend needs to be suspended so be it. The share price is already at its lowest levels since 2013 and the company needs to focus on repairing the damage to its IT architecture and in so doing restore its battered reputation in the telecoms industry," he added.
Analysts at Citi last week speculated that the company will pay no interim dividend and will defer a decision on its final dividend until the long term impact of the data loss scandal is known.
Citi also lowered its forecast for TalkTalk’s broadband customers numbers by 460,000 by the end March 2016, as it struggles to win new customers and existing users are tempted away to rivals such as BT and Sky.
Despite the total impact on TalkTalk customers now less than initially supposed, now thought to be around four per cent of customers, experts have said the cyber attack on the company was “unsophisticated”, raising questions about IT security.
The breach was the third time this year that TalkTalk has last customer data in attacks.
Four people, three of them in their mid-teens, have been arrested and bailed following the hack.