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
PROMOTED VIDEO
Arts and Entertainment
tv

First full-length look is finally here

Life and Style
life
Voices
A mother and her child
voices
Arts and Entertainment
Film director Martin Scorsese
film
News
news

The party's potential nominations read like a high school race for student body president

Voices
The veterans Mark Hayward, Hugh Thompson and Sean Staines (back) with Grayson Perry (front left) and Evgeny Lebedev
charity appealMaverick artist Grayson Perry backs our campaign
ebooks
ebooksA special investigation by Andy McSmith
Arts and Entertainment
Cold case: Aaron McCusker and Christopher Eccleston in ‘Fortitude’
tvReview: Sky Atlantic's ambitious new series Fortitude has begun with a feature-length special
Voices
Three people wearing masks depicting Ed Miliband, David Cameron and Nick Clegg
voicesPolitics is in the gutter – but there is an alternative, says Nigel Farage
News
i100
News
people
Sport
Chelsea manager Jose Mourinho
footballI have never seen the point of lambasting the fourth official, writes Paul Scholes
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

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Recruitment Genius: Technical Report Writer

£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee