Investors in Cable & Wireless Communications (CWC) seemed to welcome an announcement on Thurday morning that the company would halve its dividend, pushing the shares up 16%.
(Cable & Wireless split in two in 2010. CWC is the consumer telecoms business with customers in the Caribbean, Panama and Macao, while Vodafone is buying Cable & Wireless Worldwide, the corporate telecoms business.)
CWC broadly met market expectations with an 18% rise in revenues to $2.9bn (£1.8bn), boosted by an acquisition in the Bahamas. Core earnings ticked up 5% to $901m. The company said it was cutting the dividend as a result of the global economic uncertainty; earnings have been hit as fewer tourists visit the Caribbean.
CWC will pay a dividend of 8 cents this year, falling to 4 cents next year. Analysts said that should pave the way for increasing the dividend in subsequent years. Robert Grindle at Deutsche Bank wrote in a note:
Dividend cut comes as a relief and should prove cathartic. CWC has cut its forward dividend by 50% to $4c (9.1% yield). For the first time since demerger this now sees CWC's dividend covered with the potential for 'progressive' growth.
The shares jumped 4.5p to 32.6p.
