In the wake of today's quarterly earnings report, Telecom shares (NZX: TEL) have hit a new all-time low of $2.08 in midday trading.Telecom's result included a 38% decline in profit to $97 million, slightly better than analysts' expectations.
In the wake of today's quarterly earnings report, Telecom shares (NZX: TEL) have hit a new all-time low of $2.08 in midday trading.
Telecom's result included a 38% decline in profit to $97 million, slightly better than analysts' expectations.
The company also announced it would trim its dividend ratio to 90% for its 2011 financial year, or around 17cps (its 2010 dividend will equate to a payout of about 110% of profit).
Telecom's shares had fallen by 3.26% by 1pm against a broader market drop of 1.6%.
At a press and analyst briefing this morning, chief financial officer Russ Houlden acknowledged there had been some debate within the company about whether to reduce payout to 75%.
Some thought it would be prudent while Telecom waited for the government to announce its Crown fibre decision, said Mr Houlden.
At the other end of the spectrum, Mr Houlden was aware that some wanted the dividend maintained at its 2010 level.
Telecom could have afforded to do so without busting its net debt-to-ebitda celing of 1.7, said the CFO, but maintaining the current payout ratio would threaten the company's credit rating regardless.
Even stevens
"On my forecasts 90% should be sustainable beyond [the financial year] 2011 as capex will be coming down," Forsyth Barr analyst Guy Hallwright told NBR.
Telecom hasn't commented on its dividend policy beyond its 2011 year, which begins on July 1.
"Assuming Telecom earns around $360 million in 2011 (which is the market consensus) a 90% payout would be around 17 cents per share," said Mr Hallrwight.
"17c fully-imputed [there was nil imputation in 2010] grosses up to 24c, so on a pretax basis - for New Zealand taxpayers - there would not actually be a reduction at all."
