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Orange Now Yields Just 4.35%: I Am Waiting For The Africa/Middle Eastern Division Spinoff

Jun. 09, 2020 10:15 AM ETOrange S.A. (ORAN)3 Comments

Summary

  • Orange slashed its final dividend by 50% to just 20 cents per share. The full year dividend is now 0.50 EUR per share.
  • That's a disappointment, and Orange will probably lose some of its income-focused investors.
  • The dividend yield of 4.35% is now 'fine', but I think the future SpinCo owning the African and Middle Eastern assets could be more interesting than the parent company.
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Introduction

Orange (NYSE:ORAN) is one of France’s largest telecom companies and has large stakes in subsidiaries abroad, including Orange Belgium (TICKER) in Belgium as well as stakes in several subsidiaries operating in Africa and the Middle East. Orange was planning to spin off those African and Middle East assets into a new company, but COVID-19 has delayed those plans.

ChartData by YCharts

Orange has a relatively liquid US listing, but as the company reports its financial results in Euro, I will use the Euro throughout this article. Where applicable, I will also refer to the company’s European listing as Orange’s primary listing is on Euronext Paris where the telecom operator is trading with ORA as its ticker symbol. The average daily volume in France is in excess of 10 million shares.

Looking back at FY 2019, 2020 was supposed to be a go

2019 was a good year for Orange with an increased revenue (up 2%) an higher net income (up 50%) resulting in an EPS of 1.03 EUR per share on the back of a higher revenue combined with lower operating expenses. As you can see on the image below, Orange saved money on lowering the external purchases and labor expenses in 2019.

Source: financial statements

While boosting the net income by a double-digit percentage is nice, I also looked at the company’s cash flow statements. It’s easy enough to make an income statement say what the CFO wants it to say, but the cash flow statements indicate how much cash is flowing into and away from the business.

Orange reported an operating cash flow of 10.16B EUR but this included 950M EUR invested in the working capital position. Additionally, the total amount of taxes paid (1.08B EUR) was lower than the taxes that were due over FY 2019 (1.45B EUR). Adjusting the operating cash

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This article was written by

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We zoom in on capital gains and dividend income in European small-caps
As I'm a long-term investor, I'll highlight some stockpicks which will have a 5-7 year investment horizon. As I strongly believe a portfolio should consist of a mixture of dividend-paying stocks and growth stocks, my articles will reflect my thoughts on this mixture.

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