Market Report: Dividend let down sees BT miss out on bounce back

 

Investors in BT have been licking their lips recently at the prospect of a dividend hike. Ever since the telecoms giant announced new plans last month to tackle its massive pension deficit, hopes have been rising that a large increase to shareholder payouts would be the next step for the company.

Yet yesterday the City was on the receiving end of a wake-up call. JPMorgan Cazenove's Carl Murdock-Smith was the party pooper, with the analyst saying "hopes for a... 'hike' may be disappointed" and that a more likely scenario would be BT increasing the dividend "sustainably over time".

He also warned its results next month could see revenue guidance for the next financial year drop, claiming the group's target to return to revenue growth (excluding transit revenues) was "at risk" because of regulatory changes that will hinder its wholesale business, Openreach.

As a result, Mr Murdock-Smith decided to remove his "buy" recommendation, although he did raise his target price from 210p to 240p. In response BT missed out on the general bounce, sliding 5.4p to 213.2p, which – traders pointed out – was more than 3 per cent lower than where it was before announcing the new pension deal.

Not everyone was so downbeat, however. Credit Suisse's analysts decided to raise their target price to 250p and keep BT's "outperform" rating, arguing there was "still substantial scope for medium-term cost cutting that is not reflected in consensus forecasts".

After Tuesday's sharp sell-off had seen it finish at its lowest closing price of 2012, the FTSE 100 managed to shrug off a cautious start to trading yesterday and bounce up 39.19 points to 5,634.74.

The rally was being helped by the banks after HSBC's scribblers decided to upgrade their advice on the European sector to "overweight" for the first time in four years. Pointing out that earnings have dropped by two-thirds since 2007, they said there was now a "glimmer of light at the end of the tunnel" and that a "case can be made for over 50 per cent upside".

While Lloyds moved 0.79p higher to 30.59p, Barclays advanced 5.8p to 212.1p. The latter was given a further push by Investec's banking guru Ian Gordon raising his rating to "buy" in response to a run that has seen its share price lose around 18 per cent over the last eight sessions.

At the same time, Royal Bank of Scotland (RBS) managed to recover from an early fall to close 0.54p better off at 25.26p following the return of speculation claiming a deal between the UK government and Abu Dhabi could be close. Following reports last month that the two were in talks over a possible sale of part of the former's 82 per cent stake in RBS, the vague rumours suggested up to a fifth of the bank may be sold for around 35p a share.If true, this would still be well south of the 50p a pop average paid by us taxpayers.

The commodity stocks were also helping the modest rebound, with Antofagasta and Fresnillo jumping up 38p to 1,110p and 52p to 1,568p respectively. The miners were helped by forecast-beating overnight figures from US aluminium giant Alcoa.

Down on the FTSE 250, with Melrose reportedly getting close to a major acquisition, some in the Square Mile were speculating over who the manufacturing buyout firm may have its eye on. Oriel Securities' Harry Philips said he believed it could be a US-based target, adding that a deal would be "a considerable catalyst for the share price" as Melrose shifted up 6.9p to 406p.

Fashion chain SuperGroup surged up 29p to 607p in the wake of the latest data from the British Retail Consortium showing retail sales last month were 3.6 per cent higher than March 2011.

However, despite the welcome boost for clothing retailers, the figures did not stop blue-chip Primark-owner Associated British Foods from stretching its losing streak to a fifth, straight session by retreating 1p to 1,186p.

Thomas Cook closed 0.5p worse off at 22.75p, having added more than 13 per cent on Tuesday after announcing it was nearing a new deal with its banks. Reports from France claimed the small-cap tour operator had hired an unnamed bank to help with a potential sale of its business in the country, although City sources played down the prospect of a disposal.

ZincOx was being thrown out with the rubbish on AIM, sinking 8.4 per cent to 69.4p on the zinc producer's admission that its new recycling plant in South Korea will not open until May thanks to a broken valve.

Roxi Petroleum slumped 14.81 per cent to 2.88p after the explorer announced it was plugging and abandoning its NK-10 well in Kazakhstan. Meanwhile, PSG Solutions shot up 19.35 per cent to 148p as the property information firm revealed a tender offer that could see it return more than £4.1m to investors.

Start your day with The Independent, sign up for daily news emails
News
i100
Arts and Entertainment
Billie Piper as Brona in Penny Dreadful
tvReview: It’s business as usual in Victorian London. Let’s hope that changes as we get further into the new series spoiler alert
Life and Style
A nurse tends to a recovering patient on a general ward at The Queen Elizabeth Hospital in Birmingham
health
News
science
Arts and Entertainment
No Offence
tvReview: No Offence has characters who are larger than life and yet somehow completely true to life at the same time spoiler alert
News
Chuck Norris pictured in 1996
people
ebooks
ebooksA celebration of British elections
Arts and Entertainment
Sarah Lucas, I SCREAM DADDIO, Installation View, British Pavilion 2015
artWhy Sarah Lucas is the perfect choice to represent British art at the Venice Biennale
News
A voter placing a ballot paper in the box at a polling station
i100
News
people
Arts and Entertainment
The Queen (Kristin Scott Thomas) in The Audience
theatreReview: Stephen Daldry's direction is crisp in perfectly-timed revival
Sport
football
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant - Swiss Banking and Finance

£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...

Ashdown Group: Marketing Executive - 6 month FTC - Central London

£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...

Ashdown Group: Junior Project Manager (website, web application) - Agile

£215 per day: Ashdown Group: Junior Project Manager (website, web application ...

Guru Careers: Software Engineer / Software Developer

£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...

Day In a Page

General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers
Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

Juventus vs Real Madrid

Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

Ashes series looks a lost cause for England...

Whoever takes over as ECB director of cricket, says Stephen Brenkley
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power