Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Genesis may struggle to increase turbo charged dividend

Genesis may struggle to increase turbo charged dividend, says Forsyth Barr

By Suze Metherell

March 21 (BusinessDesk) – Genesis Energy, New Zealand’s largest energy retailer, is expected to be a strong initial performer when it lists next month because of its attractive near-term dividend yield, but may struggle to offer dividend growth over the longer term, according to brokerage Forsyth Barr.

The government plans to sell between 30 to 49 percent of the company at an indicative offer price of $1.35 to $1.65. A “turbo charged dividend” implies a gross yield of 13.5 percent to 16.5 percent in 2015, making Genesis a “very attractive offer on first glance”, Forsyth Barr analysts Andrew Harvey-Green and James Bascand said in a research note.

Genesis is the last company on the block in the government’s partial-privatisation programme ahead of September’s election. Unlike last year’s offers by MightyRiverPower and Meridian Energy, Genesis plans to maintain a dollar amount of ordinary dividend payments to provide investors with consistent returns even in periods of weaker earnings. Still, the estimated 16 cents per share dividend in 2015 is as much as Genesis can afford without increasing debt levels, the analysts said.

“The high dividend is what stands Genesis apart from the other gentailers and in our view Genesis has pushed the dividend harder than its peers,” according to Forsyth Barr. “The yield is impressive and cannot be ignored, albeit we believe growing the dividend will be a challenge. Any hiccup in earnings….and Genesis will be borrowing to pay the dividend – not a great look in our view.”

The company’s gearing ratio, measured as net debt divided by net debt plus equity, is expected to increase to 35.4 percent in 2015, from 34 percent in 2013, the brokerage said.

In addition to the dividend, investors who hold the shares for a year will receive a bonus share for every 15 they hold, up to a maximum of 2,000 shares, adding 6.7 percent to the initial yield, the brokerage said.

Forsyth Barr expects Genesis to be held alongside Meridian as the two would balance each other in a portfolio. Meridian has large hydroelectric interests and performs well during years of high rainfall while the thermal output of Genesis performs well in periods of low water.

The brokerage will rate Genesis “outperform” if the final offer price is $1.54 or below and “neutral” if the price is $1.55 or more. Genesis is scheduled to list on April 17.

(BusinessDesk)


© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

SOE Results: TVNZ Lifts Annual Profit 25% On Flat Ad Revenue, Quits Igloo

Television New Zealand, the state-owned broadcaster, lifted annual profit 25 percent, ahead of forecast and despite a dip in advertising revenue, while quitting its stake in the pay-TV Igloo joint venture with Sky Network Television. More>>

ALSO:

Insurers Up For More Payouts: Chch Property Investor Wins Policy Appeal In Supreme Court

Ridgecrest NZ, a property investor, has won an appeal in the Supreme Court over insurance cover provided by IAG New Zealand for a Christchurch building damaged in four successive earthquakes. More>>

ALSO:

Other Cases:

Royal Society: Review Finds Community Water Fluoridation Safe And Effective

A review of the scientific evidence for and against the efficacy and safety of fluoridation of public water supplies has found that the levels of fluoridation used in New Zealand create no health risks and provide protection against tooth decay. More>>

ALSO:

Scoop Business: Croxley Calls Time On NZ Production In Face Of Cheap Imports

Croxley Stationery, whose stationery brands include Olympic, Warwick and Collins, plans to cease manufacturing in New Zealand because it has struggled to compete with lower-cost imports in a market where the printed word is giving way to electronic communications. More>>

ALSO:

Prefu Roundup: Forecasts Revised, Surplus Intact

The National government heads into the election with its Budget surplus target broadly intact, delivering a set of economic and fiscal forecasts marginally revised from May to reflect weaker commodity prices and a lower tax take. More>>

ALSO:

Convention Centre: Major New SkyCity Hotel And Laneway For Auckland

Today SKYCITY Entertainment Group Limited revealed plans to build a new hotel and pedestrian laneway of bars, restaurants and boutique shopping on land it owns in the Nelson and Hobson Streets block, expanding the SKYCITY Entertainment Precinct. More>>

ALSO:

Get More From Scoop

 
 
Computer Power Plus

Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news