Chorus shares rise 4.5% as investors pleasantly surprised by dividend size

Chorus [NZX: CNU] shares rose 4.5% after the telecommunications network operator offered a bigger dividend than anticipated.

The Wellington-based company will pay an interim dividend of 8c a share on April 5 and wants to pay 20c for the full year, a level it plans to build on in future years. Chorus stopped paying dividends after regulated price cuts strained its balance sheet, forcing it to renegotiate its banking arrangements and reassess its spending programmes. When the Commerce Commission gave it an easier ride in its final decision announced in December, investors picked a return to dividend payouts.

"The one really important result is the dividend," said James Lindsay, who helps manage $400 million of New Zealand equities at Nikko Asset Management. "The dividend was certainly ahead of expectations."

The shares rose 17c to $3.94, and are up about 27% since the regulator's decision in December setting the wholesale price to access Chorus's copper network at an average $41.69 a month over the next five years, up from $38.43.

The annual forecast payment implies a dividend yield of 5.1%.

As part of the dividend programme, Chorus is offering a dividend reinvestment plan at a 3% discount rate, which includes the upcoming payment.

Mr Lindsay said that programme will help Chorus manage its cashflow, and will probably see a chunk of dividends invested back into the company.

"They'll be hoping to get a good portion of that coming back," he said.

Chorus' net profit almost halved to $33 million in the six months ended December 31 on a 9.1%  drop in revenue to $479 million, due to the more onerous regulatory burden during that period. With the higher prices, Chorus expects annual earnings before interest, tax, depreciation and amortisation in the top of its forecast of between $580 million and $600 million.

(BusinessDesk)