France Telecom to Cut Its High Yielding Dividend

France Telecom SA announced today that the company will cut its dividend forecast for 2012 and 2013 due to an uncertain macro-economic environment and competitive pressures.

The telecom giant is now targeting dividend payments to be in the range of 40 -45 percent of total operating cash flow for the next two years. France Telecom is making these painful dividend cuts in order to preserve their financial strength and to maintain a 2x net debt/EBITDA ratio.

France Telecom’s high yielding dividend currently offers investors a 9.1 percent yield. However, operating cash flow is expected to decline by 14 percent this year.

The company had previously committed to maintaining a dividend of €1.40 per share through 2012.

France Telecom’s CFO Gervais Pellissier commented in a conference call, “The economy is worse than we had expected last year.”

Investors actually cheered the news of financial prudence today, sending FTE’s share price up nearly 2 percent in morning trading on the NYSE.

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