Satellites network operator Inmarsat (ISAT) could be the next FTSE 350 constituent to cut the level of dividends it pays to shareholders.

The £2bn company provides sea, air and land communications for governments, military and enterprise customers. A period of heavy infrastructure investment has left the company’s balance sheet stretched.

Analysts calculate the company ending the current year with more than $2.1bn (approximately £1.6bn) of net debt. Those borrowings are forecast by analysts to exceed $2.7bn (£2bn) over the next three years.

Earnings cover evaporates

Rising net debt is coinciding with weak trading from Inmarsat’s maritime division and a potentially costly spectrum battle for its partner Ligado Networks in the US.

It is facing competition from rival Iridium Certus, possibly putting pressure on more than $100m in annual Inmarsat revenues earned from Ligado.

Inmarsat’s dividend has failed to be covered by earnings per share in each of the last three years. Analysts at UBS predict earnings of $0.23 versus a $0.57 cash payout in 2017, with cover expected to get even worse in 2018.

FTSE 350 companies to have already cut their dividends this year include education publisher Pearson (PSON) and doorstep lender Provident Financial (PFG).

Investors are also concerned about future payouts from Centrica (CNA), GKN (GKN) and Mitchells & Butlers (MAB). (SF)

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