PLDT's dividend lives on borrowed time

 

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Disclaimer: This is for informational purposes and is not investment advice. Figures are taken from company disclosures and exchange data; valuation ratios include the author’s calculations based on cited inputs.

There’s a familiar scene in every telecom boardroom: a CFO pointing to a clean dividend slide while the network team flips to a map full of red zones—coverage gaps, congestion pockets, fiber buildouts, and the next wave of equipment refresh. The dividend slide always looks tidy. The map never does.

PLDT’s FY2025 results delivered a dividend story that sounds comforting: the company generated ₱98.738B in operating cash flow and spent ₱60.336B on capex, leaving a healthy cushion before shareholder payouts. On paper, that’s the kind of year that lets management talk about “sustainability” with a straight face—especially with EBITDA at ₱111.231B and an ~52% margin that still looks elite for a mature telco.

But the hard-nosed investor doesn’t ask whether the dividend was covered in FY2025. That’s the easy question. The real question is whether PLDT can raise it—sustainably—without the business quietly paying for generosity with higher leverage or deferred network spending.

FY2025’s dividend comfort came from a single lever: capex stepping back

PLDT’s FY2025 revenue was steady at ₱218.388B, only slightly above ₱216.833B in FY2024, and net income softened to ₱30.218B from ₱32.555B—a reminder that the income statement isn’t exactly accelerating. The cash story, however, improved sharply because capex eased. FY2025 capex was ₱60.336B, down meaningfully from ₱78.246B in FY2024.

That one decision—capex downshift—is what makes the dividend look stronger. With CFO at ₱98.738B and capex at ₱60.336B, the simple free cash flow proxy (CFO–capex) is roughly ₱38.4B (author’s calculation based on disclosed figures). Against dividends around the ₱20B level (the Annual Report summary cites ₱20.309B, while another figure cited is ~₱20.6B depending on “paid” vs “declared”), the math finally looks like a dividend funded by surplus cash, not financial choreography.

Here’s the part dividend bulls don’t love to linger on: FY2024 showed the opposite. CFO was ₱81.731B and capex ₱78.246B, implying only about ₱3.5B of that same simple free cash flow before dividends (author’s calculation). And yet, dividends were still about ₱20.8B in total.

So yes, FY2025 improved “dividend sustainability.” But it did so in a way that makes skeptics raise an eyebrow: the dividend became sustainable the moment capex stopped being aggressive.

The dividend raise question runs into the debt wall

A dividend can be maintained through a rough patch if a company has funding flexibility. But raising a dividend year after year is a different sport. You need consistent excess cash after network investment and after debt service priorities.

PLDT’s own disclosures frame the constraint: the company is focused on maintaining positive free cash flow and targeting a leverage ratio of 2.0× net debt to EBITDA. Yet the Annual Report’s financial soundness indicators cite net debt/EBITDA at 2.56× and interest coverage at 3.35×. Those are not emergency numbers, but they’re also not “dividend growth runway” numbers—especially for a business that must keep spending heavily just to prevent the network from aging into irrelevance.

Look at the scale behind the curtain: PLDT’s total assets are ₱634.828B with total liabilities at ₱506.745B—this is a leveraged infrastructure utility, not a light-capital consumer brand that can throw off cash without reinvestment. And costs that don’t show up as “capex” still matter: in the parent-company audited figures, financing costs (net) are material at ₱9.188B, and impairments remain part of the landscape.

So if management chooses to raise dividends, skeptics will ask: raise dividends from what—surplus cash, or tolerance for leverage?

Capex isn’t discretionary forever—competition collects its dues

Telecom is one of the few industries where “underinvesting” doesn’t merely slow growth—it can actively accelerate decline. The FY2025 results show the business mix is shifting: Fixed Line revenues (₱115.772B) surpassed Wireless (₱102.616B), with fixed line growing and wireless easing year-on-year.

PLDT highlights the growth in broadband subscribers to ~3.79M (+11%), and continues to position fiber scale and enterprise/ICT as key engines. That’s the “good capex”—fiber expansion, data centers, capacity. But it also reinforces the trap: the growth engine itself is capex-hungry.

Wireless, meanwhile, is where dividend dreams go to get stress-tested. PLDT notes competition, ARPU pressure, churn dynamics, and it cites an estimated mobile market share down to 42% in 2025 from 45% in 2024 and 47% in 2023. Share erosion is not just a marketing problem. It can become a capital problem: when yields compress and share slips, telcos tend to respond by either subsidizing harder (hurting cash) or investing harder (hurting free cash flow).

And that brings us to the dividend raise dilemma: the “extra” cash that could fund higher dividends is the same cash the network may need to defend competitive position.

Regulation adds a slow-burn cost of capital risk

Even if competition behaved, regulation might not. PLDT explicitly flags the Konektadong Pinoy Act and its shift toward an open-access regime, including infrastructure sharing and spectrum management changes—exactly the kind of policy shift that can pressure returns over time.

That matters for dividend growth because open-access dynamics can turn infrastructure from a moat into a regulated asset base, where incremental returns are harder to defend. If infrastructure must be shared more broadly, the incentive often becomes to spend to differentiate on quality—and spending is the enemy of free cash flow expansion.

So—can PLDT sustainably raise the dividend?

The honest skeptical answer: Maybe—but FY2025 alone doesn’t prove it.

What FY2025 does prove is narrower: PLDT can generate a dividend-friendly cash profile when capex is moderated. It also shows management is trying to bring capex down structurally, guiding 2026 capex in the mid-₱50B range. If that guidance holds and operating cash flow remains near FY2025 levels, PLDT could raise dividends modestly without immediately breaking the math.

But sustainability of higher dividends requires three conditions that the company has not yet “earned” across cycles:

1. Capex discipline must persist without sacrificing competitiveness (2026 capex guided mid-₱50B).
2. Leverage must drift toward the company’s own 2.0× target, not stay elevated at 2.56× net debt/EBITDA.
3. Operating performance must hold in a tougher wireless environment, where share and pricing are under pressure.

Until those conditions are visibly true, a dividend raise risks becoming cosmetic—a transfer from future network resilience (or balance-sheet strength) to present-day yield.

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The dividend is a promise—debt and capex are the contract

PLDT’s FY2025 dividend looks sustainable because capex took a breath. But a higher dividend needs more than a breath—it needs a trend: capex held down and leverage brought closer to target and the network still winning.

Until then, treat dividend growth as aspirational.

Because in telecom, the dividend is what management says, and debt plus capex are what the network collects.

We’ve been blogging for free. If you enjoy our content, consider supporting us!

Disclaimer: This is for informational purposes and is not investment advice. Figures are taken from company disclosures and exchange data; valuation ratios include the author’s calculations based on cited inputs.