Corus’ dividend yield is about 17 per cent, far above the norm of between 2 and 4 per cent for other North American media companies, Yaghi wrote.
“We believe the best course for Corus is to cut the dividend so that it falls within the comparable range (i.e. 5 per cent),” he wrote.
Barclays analyst Phillip Huang also believes Corus may need to make a bigger dividend cut if it wants to meet its debt reduction goal.
“We believe Corus’ commitment to rapidly reduce leverage to below three times will not change with this failure of non-core asset sale,” Huang noted to clients.
“Given our expectation of continued soft ad revenues and low visibility, we believe a dividend cut of greater than 50 per cent would be prudent.”
Both Corus and Bell said they’re reviewing the decision, but did not have further comment on whether they plan to challenge the verdict at the Competition Tribunal. If Corus appeals the decision, the deal would still need approval from the Canadian Radio-television and Telecommunications Commission.
Analysts expressed surprise the regulator blocked the deal given changes to the media market in the past five years.
Scotiabank analyst Jeff Fan noted to clients that Bell has a lower concentration of media assets in Quebec than it did after the divestiture.
“We are surprised that the Competition Bureau did not approve the deal given the share shift in Quebec media and the overarching shift of advertising dollars and viewership away from television,” Fan wrote.
It’s not clear whether Corus will be able to find a buyer for the channels that is willing to pay as much as Bell, which expected to find synergies.