Telkom dividend juicy but worrying
Mobile business is the star performer after years of losses but core fixed-line business continues to be under pressure
Telkom’s share price has shed 14.95% since June 6 after the company reported its full-year financial results, which had a record dividend payout of 422c, up 56.3%. Its full-year performance was average and lifted mainly by property sales. Stripping that out, earnings growth was actually negative. "The dividend was very juicy but we think the market now questions whether this is sustainable, given the underlying operating performance," says Farai Mapfinya, chief investment officer at Falcon Crest Asset Managers. The fixed-line group’s management has, however, done an impressive job in stopping the rot and renewing investor confidence — though they still have a tough journey ahead. Management, led by CEO Sipho Maseko, managed to substantially reduce costs, which were a drain on the group. Telkom’s brand positioning within the market has also been improved. Its business-focused unit has been boosted by the purchase of BCX — which has already lifted its earnings from business clients an...
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