Hana Securities said on the 28th that if SK Telecom reduces dividends this year, its share price could see a steep drop. It maintained a Buy rating and a target price of 70,000 won, but noted it would lower the target price if a dividend cut materializes. SK Telecom's previous closing price was 53,800 won.
Investor concern has grown recently over the possibility that SK Telecom will cut this year's dividends. On the second-quarter conference call, SK Telecom's management said this year's weak results have reduced its capacity to pay dividends and expressed the resulting funding burden. As a result, investor attention is focused on the SK Telecom third-quarter dividend announcement, expected this week.
Kim Hong-sik, an analyst at Hana Securities, said, "We now need to keep in mind the possibility that SK Telecom's total dividends in 2025 will decline," adding, "Management has already primed the market, and it may push through a dividend cut decision using a third-quarter loss as a pretext."
Some expect that even if SK Telecom reduces this year's dividends, the share price decline may not be large given its valuation.
However, Kim said, "A surprisingly steep share price drop could occur," adding, "That's because investor confidence may fall and dividend-focused investors are likely to exit."
There could also be major changes in the shareholder base. Citing past cases, Kim added that the selling by existing shareholders can have a larger impact on the share price than buying by new investors, warranting caution.
Kim said, "If the floor for SK Telecom's dividend per share (DPS) drops to 2,500 won and the expected dividend yield band rises to the high-5% range, we judge that SK Telecom's share price could fall to as low as 45,000 won."
SK Telecom is facing continued headwinds, from large-scale expenses related to a hacking incident to the possibility of a dividend cut.
Kim said, "We thought it would end with recognizing one-off expense, but now even dividends, the foundation of telecom stock prices, are being shaken," adding, "For now, the likelihood that SK Telecom will post a short-term, sharp rebound is not high."
He also said that even if the third-quarter dividend is maintained, expectations for dividend growth remain low, so SK Telecom's share price gains will likely be limited. He added that if dividends are reduced, the possibility of a steep share price correction should also be kept open.