Home Telecoms & NBN Telstra shares hammered after dividend change announced

Telstra shares hammered after dividend change announced

Shares of Australia's biggest telecommunications company have been hammered this morning after the announcement that it would be cutting its dividends by 30% from next year onwards.

Telstra's shares fell by as much as 12% at one stage to a five-year low of $3.81 before recovering.

Along with the announcement of its annual results, the telco said this morning that it would pay a final dividend of 15.5 cents per share for 2016-17, taking the payout for the year to 31 cents, a 99% payout.

But it added that the new policy would result in the total dividends being 22 cents a share, fully franked, from 2017-18 onwards.

Telstra chief executive Andy Penn said the change was needed because the telco's revenue was expected to take a hit of about $3 billion due to the rollout of the national broadband network.

telstra results

Telstra chief financial officer Warwck Bray and chief executive Andy Penn at the announcement of the results.

The company gets two income streams from NBN Co – payment for use of existing infrastructure which will peak at $1 billion annually, and a $9 billion payment over a number of years as compensation for giving up its wholesale business.

Penn said the new dividend policy was "much more in line with our global peers and local large companies", and "about setting the business up for success in the future".

From 2017-8 onwards dividends will be augmented by selling forthcoming NBN receipts.

The plan, which needs approval from the government, NBN Co and investors, is to sell 40% of long-term recurring NBN Co receipts, bringing in $5.5 billion.

"Our intention would be to use the proceeds to reduce debt by around $1 billion, with the balance to support a capital management programme to enhance shareholder returns, most likely through a series of on-and-off-market buy-backs," Penn said.

Photos: courtesy Telstra


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Sam Varghese

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A professional journalist with decades of experience, Sam for nine years used DOS and then Windows, which led him to start experimenting with GNU/Linux in 1998. Since then he has written widely about the use of both free and open source software, and the people behind the code. His personal blog is titled Irregular Expression.