Inmarsat shares come down to earth as divi slashed

Mike van Dulken, head of research at Accendo Markets, said Inmarsat management "capitulated, doing the last thing you want to when trying to keep investors from jumping ship".

"However, this has slashed the income that had been keeping the loyal onboard as well as the attractive yield that had been offering at least some support to the share price amid a protracted downtrend," he said.

Van Dulken added that profitability (adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) missed analyst estimates

"There is a lack of visibility on future cash payments from a key (US) client as well as caution on government contracts (26% of group revenues, 35% of adj. EBITDA) due to budget constraints. And capital expenditure of $500m - $600m is now forecast all the way through 2020."

"This means more cash out the door and, in the take-no-prisoners world of results-day digestion and share price reaction, remember that revenues are vanity, profits are sanity but cash flow is reality. And if the spending doesn’t pay off….."

Inmarsat said it would be cutting the dividend to 20 cents a shares from 54c in 2016 and a reduced 33.6c in 2017.

"This depresses the future dividend yield to just 3.3%, from a previously difficult-to-ignore 8%, reducing the shares’ attractiveness to bargain hunters and income seekers alike. The move is an effort to preserve cash, and follows the 2016 introduction of a scrip div option designed to do the same and keep frustrated shareholders on board," van Dulken said.