BT pays out bigger dividend

TELECOMS group BT has bowed to shareholder demands by sharply raising its dividend, promising to pay out even more next year and launching a surprise share buyback programme.

The country's dominant phone company has been under pressure from investors to lift the proportion of earnings it pays out closer to that of other heavily regulated utilities.

The group has increasd its interim dividend by 42% to 3.2p and vowed to pay out 50% of this year's earnings and 60% of next year's as dividends.

Analysts predict that BT will earn between 16p and 17p a share, leading to a full-year payout of at least 8p. That's worth an average of £60 for BT's 1.8m private investors, who own an average of 750 shares each.

Chairman Sir Christopher Bland said BT had hit its target of paying out half its earnings one year early. He added: 'This continues to be a challenging year for our traditional business but our new wave businesses are delivering strong growth.'

Notable among the new business is broadband where BT now has 1.5m users.

Chief executive Ben Verwaayen said: 'The UK has become one of the fastest-growing broadband nations with our broadband connections trebling over the past year.'

BT's turnover fell by 2% in the second quarter to £4.57bn, with profits slightly better than expected, up 7% at £529m before tax, goodwill-amortisation and one-off items. Earnings per share rose 19% to 4.4p.

Bland said the buyback would be funded from cash generated above its target of cutting net debt to £7bn. At the end of the first half, net debt was £8.77bn, down 33% on a year ago.

BT's traditional residential phone market was hit by regulatory changes and the ending of 192 directory enquiries, which together cut its quarterly revenue by £80m.