BT set to increase dividend

Telecoms giant BT is expected to announce plans to increase its dividend policy when it reports a rise in profits on Thursday.

City analysts reckon BT could hike its payout to shareholders by a third over the next three years as it continues to improve margins and cut costs. The announced half-year dividend was up 8 per cent.

Chief executive Ian Livingston cheered the City in February when he said BT would reach £6bn profit before exceptional items, known as Ebitda, in 2012 – a year sooner than planned.

Analysts forecast a 16 per cent rise in adjusted pre-tax profits to around £2.4bn in the year to March, despite an estimated 3.5 per cent slide in revenues to about £19.4bn. The group has also reached a deal with trustees to pay an extra £2bn into its pension fund to reduce the deficit before the end of the financial year.

Jerry Dellis, an analyst at Jefferies bank, said the combination of improved profits and the pension deal gives BT "scope to enhance dividend distributions".

Shares in BT, valued at just under £17bn, have risen 10 per cent in the past year.