Telecom Plus (LSE:TEP), which trades as Utility Warehouse, paid a total ordinary Dividend of 50 pence for the year to 31 March 2026 and added a GBP 40 million share buyback, equal to 50 pence per share, for a total distribution of 100 pence compared with 94 pence a year earlier. The company has also set out a new five-year plan. This article explains how the payout is structured and funded.

Company Overview

Telecom Plus supplies subscription-style essential household services in the United Kingdom, including energy, broadband, mobile and insurance, under the Utility Warehouse brand. Customer numbers rose 23.3% to 1,434,403, including 193,000 broadband customers acquired from the TalkTalk Group. The new plan announced in June 2026 aims to double multiservice customers by the 2031 financial year.

Dividend Profile

The ordinary dividend for the year comprised an Interim Dividend of 38 pence and a final dividend of 12 pence. The final dividend is lower than the previous 57 pence because the company now splits distributions between dividends and buybacks, with total Shareholder distributions rising to 100 pence from 94 pence. The stock table shows a trailing Dividend Yield of 5.54%, trailing Diluted Earnings per Share of GBP 1.00 and a price-to-earnings ratio of 9.14.

Dividend Sustainability Analysis

The company targets a payout of 80% to 90% of adjusted net profit and now returns Capital through both dividends and buybacks, so the analysis considers total distributions.

Payout Ratio and Earnings Coverage

Adjusted earnings per share were 122.8 pence, up 3.0%, and statutory earnings per share were 101.2 pence, up 5.1%. The 50 pence ordinary dividend represents about 41% of adjusted earnings, and total distributions of 100 pence represent about 81%, consistent with the stated payout policy. Statutory pre-tax profit rose 6.7% to GBP 113.0 million.

Adjusted Cash Flow Coverage

Management allocates GBP 55 million a year to invest in the plan while keeping total distributions at around GBP 100 million by the 2031 financial year. The company said it expects distributions for the current year to be weighted to the second half, with about 40% paid at the interim stage and 60% at the final stage, and about half of the interim distribution made through the buyback at current share price levels.

Balance Sheet and Leverage

Net Debt to adjusted EBITDA was 0.9 times at the year end. The company expects around 1.5 times at the end of the 2027 financial year, because of Investment in growth, before reducing toward about 1.0 times over the plan. The interim position a year earlier was 1.1 times, which shows the range in which the group operates.

Liquidity

The group generates cash from regular monthly subscription billing, and customers typically have below-market rates of churn and bad debt. Working Capital movements arise from energy purchasing and the timing of industry charges, which the company said have been re-phased to weight profit toward the second half.

Revenue Stability and Profit Trends

Organic customer growth was 10.3% for the year, and the company reported Gross Profit growing faster than revenue. For the current year management indicated a profit dip as it invests, with multiservice organic customer numbers rising at an annualised rate of over 11% to about 526,000 in the first half. The five-year plan targets adjusted pre-tax profit of around GBP 175 million.

Interest Rate and Commodity Exposure

Energy wholesale prices influence margin, and the company has noted that elevated customer non-payment from previously high energy prices increased bad debt to 2.1% of sales. Interest costs depend on borrowing, which is expected to rise modestly during the investment phase.

Counterparty Concentration

The customer base is made up of more than 1.4 million households, so no single customer is material. The company relies on wholesale energy suppliers and network operators, and the TalkTalk broadband customers were migrated onto its own platform.

Management Commentary

Chief executive Stuart Burnett said the first half of the current year showed encouraging delivery of the new five-year plan with building momentum. Management expects to reach return on capital employed above 30% and net debt to adjusted EBITDA of around 1.0 times by the end of the plan.

Sector-Specific Dividend Risks

Utility and telecom service providers are affected by wholesale energy prices, regulation, customer payment behaviour and competition. Changes in pricing rules can influence margin, and acquisitions bring integration requirements.

Key Risks to Monitor

1. The mix between dividends and Buybacks may change from year to year.

2. Net debt to earnings is expected to rise to about 1.5 times before easing.

3. Investment of GBP 55 million a year affects near-term profit.

4. Energy prices and bad debt influence margins.

5. Integration of acquired broadband customers needs to continue.

Bull Case

Supporters point to total distributions of 100 pence, customer growth of 23.3%, low Leverage and a plan aiming for adjusted profit of GBP 175 million by the 2031 financial year. They note that buybacks add to per-share returns.

Bear Case

A measured view notes that the Cash Dividend portion has fallen to 50 pence, that adjusted earnings per share grew only 3.0%, and that near-term profit is expected to dip while the company invests. Leverage is planned to rise in the short term.

Latest News and Developments

Full-year results were published in June 2026 alongside the new five-year plan. A trading update on 6 October 2026 reported encouraging progress, and half-year results are due on 24 November 2026.

Dividend Sustainability Rating

Rating: Moderately Sustainable

The rating reflects distributions of about 81% of adjusted earnings in line with policy, low leverage of 0.9 times, and a split between dividends and buybacks that gives the board flexibility. The cash dividend is smaller than before, and results will show how the mix evolves.

Investor Takeaway

Telecom Plus is changing how it returns capital, balancing dividends with buybacks while investing in customer growth. Total distributions have increased, leverage is modest, and the new plan sets a clear framework for distributions.