BT investors kept happy with buyback and rise in dividend

The telecoms company has focused on cost cutting and improving productivity in a bid to recover from profit warnings in 2008 and 2009, sparked by problems at its corporate Global Services division.

The group is raising its full-year dividend by 12 per cent to 8.3p a share and pledged to increase the payout by 10-15 per cent a year over the next three years.

It also announced plans to buy back £300m of shares.

Bernstein analyst Robin Bienenstock said: “BT provides a level of stability and security that has so far been utterly absent in the rest of the telecom sector.”

But big investors were disappointed that the share payout wasn’t even greater.

BT raised hopes of higher payouts in March when it reached a deal to pay down the £4bn deficit on its staff pension fund more quickly than previously planned, resolving a long-running concern for investors.

The former state monopoly, which was one of the first big privatisations in the 1980s, has around one million shareholders.

Chief executive Ian Livingston said: “We have made progress again this year delivering for all our stakeholders, but we know there is more to do.”

Underlying revenues declined 1.9 per cent to £19.3bn as it suffered falling income from calls, but underlying earnings rose three per cent to £6.1bn after it reduced its operating costs by £933m.

It has made £2.9bn of savings over the past three years and hit its target of £6bn earnings a year ahead of schedule.

The telecoms giant benefited from the strength of broadband demand after it added more than a million homes and businesses to its network in the year to the end of March.

More than half a million customers have signed up to its BT Infinity service, while its Vision internet TV service saw a 23 per cent rise in customer numbers to 700,000.

The expansion of its online services was helped by the rapid roll-out of fibre-optic cable, which provides download speeds of up to 80 megabits per second.

It is now available to 10 million homes.

Communication Workers Union deputy general secretary Andy Kerr said: “We warmly welcome this strong set of results, which are good news for the company, its employees and its shareholders. BT’s continued investment in fibre broadband is also great news for customers, jobs and services.”