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

 

Scoop Business: RBNZ Keeps OCR At 3.5%, Signals Slower Pace Of Future Hikes

Reserve Bank governor Graeme Wheeler kept the official cash rate at 3.5 percent and signalled he won’t be as aggressive with future rate hikes as previously thought as inflation remains tamer than expected. The kiwi dollar fell to a seven-month low. More>>

ALSO:

Weather: Dry Spells Take Hold In South Island

Many areas in the South Island are tracking towards record dry spells as relatively warm, dry weather that began in mid-August continues... for some South Island places, the current period of fine weather is quite rare. More>>

ALSO:

Scoop Business: Productivity Commission To Look At Housing Land Supply

The Productivity Commission is to expand on its housing affordability report with an investigation into improving land supply and development capacity, particularly in areas with strong population growth. More>>

ALSO:

Forestry: Man Charged After 2013 Death

Levin Police have arrested and charged a man with manslaughter in relation to the death of Lincoln Kidd who was killed during a tree felling operation on 19 December 2013. More>>

ALSO:

Smells Like Justice: Dairy Company Fined Over Odour

Dairy company fined over odour Dairy supply company Open Country Dairy Limited has been convicted and fined more than $35,000 for discharging objectionable odour from its Waharoa factory at the time of last year’s ”spring flush” when milk supply was high. More>>

Scoop Business: Dairy Product Prices Decline To Lowest Since July 2012

Dairy product prices dropped to the lowest level since July 2012 in the latest GlobalDairyTrade auction, led by a slump in rennet casein and butter milk powder. More>>

ALSO:

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:

Get More From Scoop

 
 
Computer Power Plus

Standards New Zealand

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