Rogers Communications’ Dividend Sustainability Amid Earnings Volatility

Rogers Communications (RCI) has long been a staple for income-focused investors, offering a consistent CA$0.50 quarterly dividend since 2022. However, the company’s ability to sustain this payout amid volatile free cash flow (FCF) and mixed earnings trends raises critical questions. This analysis evaluates the dividend’s coverage, historical consistency, and future viability, weighing risks and rewards for investors.

Dividend Coverage: A Tenuous Balance

The dividend coverage ratio, a key metric for assessing sustainability, reveals a concerning gap. As of June 30, 2025, Rogers’ LTM FCF stood at $883.6 million, while total 2025 dividend payments (based on 540 million shares outstanding and four quarterly payouts of $0.50) amount to $1.08 billion [2][3]. This results in a coverage ratio of 0.817, meaning FCF falls short of covering the dividend. While Q2 2025 FCF surged 39% to $925 million [1], the LTM figure reflects a 25.8% decline compared to the prior year [3], underscoring structural challenges.

The company’s debt leverage ratio has improved to 3.6x by June 2025, aided by a $4.85 billion equity investment from Blackstone [1], which could free up capital. However, FCF volatility remains a red flag. Over the past five years, Rogers’ FCF has declined at an average annual rate of -6.80%, lagging the telecom sector’s 0.4% growth [2]. This divergence suggests operational inefficiencies or sector-specific headwinds that could strain the dividend.

Historical Consistency: A Double-Edged Sword

Rogers has maintained a $0.50 quarterly dividend since 2022, with no increases since 2021 [1]. While this consistency is appealing to income investors, it masks underlying fragility. The dividend yield has fluctuated between 3.7% and 5.7% due to stock price volatility [1], reflecting market skepticism about long-term sustainability. For context, the company’s FCF per share has historically grown at a median rate of 5.40% over 13 years [2], but recent declines (e.g., LTM FCF per share of $2.87) indicate a reversal of this trend.

The Media segment, now bolstered by a 37.5% stake in Maple Leaf Sports & Entertainment (MLSE), is projected to generate $3.9 billion in 2025 revenue and $250 million in adjusted EBITDA [1]. This expansion could stabilize cash flows, but it remains to be seen whether these gains offset declines in other segments.

Future Viability: Strategic Moves vs. Structural Risks

Rogers’ recent investments in sports broadcasting (e.g., a 12-year NHL media rights deal) and its majority ownership of MLSE signal a pivot toward high-margin content [1]. These moves could diversify revenue streams and reduce reliance on volatile telecom margins. However, the company’s LTM net cash flow of $5.699 billion (as of June 2025) includes non-FCF items like working capital changes, which may not translate to sustainable dividend support [3].

A critical risk lies in the gap between dividend obligations and FCF. If FCF remains below $1.08 billion annually, Rogers may face pressure to cut or suspend the payout—a scenario that would erode investor confidence. Conversely, if the Media segment’s growth materializes and FCF rebounds, the dividend could become more secure.

Conclusion: A Calculated Bet for Income Investors

Rogers’ dividend offers an attractive yield for income-focused investors, but its sustainability hinges on the company’s ability to reverse declining FCF trends. The current coverage ratio of 0.817 suggests a precarious balance, with the dividend not fully supported by cash flow. However, strategic investments in sports and media, coupled with improved leverage ratios, provide a path to recovery.

For investors, the key is to monitor FCF trends and the success of the MLSE integration. While the dividend’s consistency is a draw, the risks of a potential cut cannot be ignored. Those with a high-risk tolerance and a long-term horizon may find value in Rogers’ growth potential, but caution is warranted given the current financial dynamics.

**Source:[1] Rogers Communications Reports Second Quarter 2025 Results [https://finance.yahoo.com/news/rogers-communications-reports-second-quarter-110000111.html][2] RCI (Rogers Communications) Free Cash Flow [https://www.gurufocus.com/term/total-free-cash-flow/RCI][3] Rogers Communications Inc. (RCI) Free Cash Flow annual [https://valuesense.io/ticker/rci/fcf]