Comment: City not carried away despite dividend largesse

THE City, somewhat unfairly, looked a gift horse in the mouth yesterday. BT, riding an earnings recovery from its profit‑warning days, had a troika of good news for its shareholders.

The company upped its annual dividend payout 12 per cent, unveiled plans for a £300 million share buyback in 2013 as a further sweetener, and promised divis would grow 10 to 15 per cent a year for the next three years.

In this era of austerity and flat interest rates, this may prove a tasty set of pledges for its mass of small shareholders.

However, the company’s shares – which admittedly had risen 11 per cent over the past six months – closed down 2.6 per cent as the City had expected the dividend largesse to be even greater, some forecasting a possible increase of up to 18 per cent a year.

Chief executive Ian Livingston and the rest of BT’s board are probably right to calibrate higher dividends with the desire to conserve cash for investment and financial ballast.

Though the latest profit numbers are decent, and the company is throwing off cash, revenues clearly remain under pressure from regulators applying the brakes and economic headwinds in the small business sector and in mainland Europe.

Costcutting has taken up the slack, while BT has also continued to make impressive strides in super-fast broadband, indicating that Livingston has BT Vision, so to speak, but also continues to count the lightbulbs.

It is sensible to temper rewarding shareholders for their years of patience with solid dividend cover.

The trade-off is apt for a telecoms company that, in text-message mode, is neither in LOL or OMG territory.

Trinity’s changes won’t solve the problems

AS THE media joke goes, “how many press officers does it take to change a lightbulb?” Answer: “Can I get back to you?”

It is a similar situation in trying to assess where publishing group Trinity Mirror goes from here after the recently-announced plans for the departure of the heavily remunerated, costcutting chief executive Sly Bailey.

The latter faced shareholders at Trinity’s annual general meeting yesterday, having to admit that, on top of the woes of its regional paper division, the company has also seen revenues at its national titles such as the Sunday Mirror and People tumble since Rupert Murdoch launched a Sunday version of the Sun. It didn’t improve shareholders’ mood, with nearly half of them voting against the remuneration report.

However, when the furore over Bailey’s high pay amid a bombed-out Trinity share price subsides, the problems facing new management will be the same as have faced the current crew.

Cutting costs, merging and outsourcing can only buy time without an underlying plan for growth, and Bailey leaves Trinity without an obviously coherent one.

Dixons’ mixed message for the high street

ELECTRICALS retailer Dixons departed from the high street script yesterday with a surprisingly resilient fourth-quarter sales performance.

In a world of battered retailers – from Aquascutum, Clinton Cards and La Senza to Comet, HMV, Thorntons and several others – Dixons showed it is possible to sell something other than food in this tough climate for consumers and still make a buck.

Interestingly, Dixons said its strong performance owed not a little to the success of Apple’s iPad.

From the buffeted newspaper and book publishing industries to electricals and numerous other sectors, the iPad is in danger of becoming the knight in shining armour at this time of extended economic downturn.

Business people frequently say there are no silver bullets to turn difficult fortunes around, but the iPad is increasingly becoming the next best thing and is again testament to why Apple largely bestrides the digital globe these days.

Before we get too carried away, however, Dixons warned the trading environment remained highly uncertain and further aggressive management of costs remained high on the agenda. Heigh-ho.