Chorus teased a dividend increase on its interim results conference call yesterday.
But just how fat could the dividend payout get?
UBS NZ director Phil Campbell is expecting it now to climb to 60 cents per share by 2027 - up from his previous estimate of 55cps by 2028.
The bullish comments by Chorus executives also saw Jarden's Arie Dekker and Grant Lowe up their near-timer payout estimates. They previously saw the dividend (forecast at 24cps this year) growing to 40cps in 2022 from their previous pick of 35cps.
Jarden and Lowe liked the "clear intent message" on raising dividends. However, the pair also cautioned that regulatory perils remain and "FWA risk needs to play out first" - a reference to Spark and Vodafone's ambitions to fixed-wireless 4G or 5G access as a substitute to a Chorus landline.
Forsyth Barr analysts Matt Henry and Ashton Olds were also upbeat on the dividend talks. In a new note overnight, they say Chorus should be generating free cash flow of 70cps by 2024, when the "communal" part of the UFB network is complete, "allowing for a long-term sustainable dividend of around 50cps".
After a decade of heavy spending on the UFB, "the cash prize is in sight" they say.
Chorus shares, already on a bull run, closed up 5.6 per cent to $6.73 yesterday, even as the broader market fell 1.8 per cent on Covid-19 fears.
Post-result, Henry and Olds maintained their "outperform rating", although with its recent run-up, Chorus is already closing in on their 12-month target of $6.90.
WACC-off: Chorus, regulator at odds over future of broadband
UBS maintained its "neutral" rating, although Campbell says its 12-month target was bumped from $5.85 to $6.40.
Jarden's Dekker and Lowe also stuck with "neutral" and also increased their target price - from $5.64 to $6.40. The pair cautioned their target price "remains subject to high degrees of error given the importance of the Regulated Asset Base and Maximum Allowable Revenue." That is, the Commerce Commission is still deciding key parameters for Chorus before new a new, post-UFB rollout telecommunications law kicks in.
Yesterday, Chorus declared a dividend of 10cps for the first half, and confirmed full-year guidance of 24cps in its first briefing under new chief executive JB Rousselot, who was joined by CFO David Collins.
Campbell said he was surprised by the pair's comments about future payouts.
Chorus had previously indicated it would not give dividend guidance until 2021.
Rousselot and Collins still didn't provide numbers, "But they did give clarity around the principles. You're going to a more aggressive payout ratio, faster," UBS director Campbell said.
Collins said that with the bulk of UFB spending behind it, Chorus would be able to return the majority of its free cash flow to shareholders in dividends from FY2022 as it sought to adopt a policy in-line with similarly regulated utilities across Australasia.
The CFO also said that a one-off special dividend or share buyback could be on the cards, with $225m of available subscribed capital for the purpose.
Campbell said it was also notable that Rousselot obviously had retailers Spark and Vodafone's fixed-wireless pushes in his sights as they upgrade to 5G.
The new CEO - who took the reins in November and comes from senior roles at Telstra and NBN Co - indicated his company would go on the front foot with a new campaign. "We can't just rely on retailers to explain how great a fibre connection is. We have to do a lot more toward explaining that not all broadband connection is created equal."
Read more about Spark and Vodafone's fixed-wireless incursion in, and the ongoing Commerce Commission attempts to set limits on Chorus in the post-UFB rollout era, in the Herald's coverage of Chorus's half-year result.