Analyst Note| Javier Correonero |
Narrow-moat KPN met its own guidance for fourth-quarter 2022. Service revenue grew by 1.5% organically while EBITDA after leases grew 2.4% year over year. As usual, KPN has kept operating expenses in check, growing by just 0.8% during the whole of 2022, something we consider a success given the current energy and inflationary environment. As guided by KPN last quarter, it expects flat EBITDAaL during 2023 even in the current environment of high energy prices. Despite flat expected growth in 2023, management intends to grow dividends by almost 5%, from EUR 0.143 to EUR 0.150 per share, which we believe is achievable, as there is enough cash flow available for dividends after servicing debt. It also intends to repurchase EUR 300 million in shares (like it did in 2022), although we see a neutral impact on shareholders here unless shares trade below our EUR 2.80 fair value estimate, which we maintain. We recommend KPN to dividend investors looking for an attractive, but maintainable dividend yield thanks to the stability of the Dutch market and a strong focus on cost controls.