Stock Takes: Fletcher Building's payout worth a smile

Fletcher Building will pay out a higher dividend ratio this year despite its troubles. Photo/Natalie Slade.

Fletcher Building's shareholders have had a rough ride when it comes to the share price but they should be all smiles after its dividend payout was revealed this week.

While the construction firm's share price has fallen more than 14 per cent in the last year its dividend will be maintained at 39c per share - the same as its 2016 payout.

That is despite the payout exceeding its dividend target policy.

Fletcher has a target ratio of 50 to 75 per cent of net earnings but the pay-out this year will mean the rate hits 87 per cent.

Some suggest Fletcher has done this to keep its dividend-focused investors like major global shareholder Blackrock happy.

A Fletcher Building spokeswoman said its decision to exceed the target was based on the average of the 2017 financial year and expected 2018 financial year returns.

One market source said the fact the company had maintained it payout was a sign of confidence for the 2018 financial year.

But the company also gave no guidance on its forecast profit for 2018.

The company's financial report revealed it exceeded its leverage target for 2017.

Fletcher's has a target of 2 to 2.5 times net debt to earnings before interest, tax, depreciation and amortisation but hit 2.7 times as of June 30.

The Fletcher spokeswoman said this was a result of the lower earnings in 2017.

"But we expect it to return to below the 2.5 times level by the end of FY18."

Fletcher shares have risen since the results announcement and closed on $8.42 yesterday.

Watch list

Results season has held few surprises so far but next week could see more come to light.

Sharemarket darling A2 Milk will report its full-year result on Wednesday and investors will be looking to see whether the company can live up to the hype.

Shares in A2 Milk have risen by more than 130 per cent in the last year and more than a dollar in the last month alone.

One market player said the result would be the "moment of truth" for A2 Milk and a test of whether the company could deliver on expectations.

Several brokers have upgraded their expectations for the stock ahead of the result and some believe the company may even beat those.

Investors will also be looking out for any future guidance to justify its record share price.
A2 Milk shares closed on $4.99 yesterday.

Sky TV's strategy?

On the flipside of the coin will be Sky TV which reports on Tuesday. Investors will be looking to see what Sky's strategy will be in the wake of its failed merger with Vodafone.

The Commerce Commission rejected the $3.44 billion merger in February and the companies called off a decision to appeal in June.

But the challenges for Sky TV remain with paid online streaming subscriptions continuing to grow.

Analysts will be looking for indications from chief executive John Fellet on what his plans are. If the merger had gone ahead there was some expectation Vodafone boss Russell Stanners would take the lead.

Fellet has been with Sky for some time and investors will be looking to see if he still has the drive to keep pushing the company forward.

Sky shares are down 33.7 per cent in the last year. Yesterday they closed at $3.23.