Dividend cuts hit Telstra investors

TELSTRA will withhold halfa-billion dollars to its army of mum-and-dad shareholders after cutting its dividend for the first time in 16 years, as first-half profit dropped 4.9 per cent to $1.7 billion.

In unveiling the results for the six months to December, chief executive Andy Penn confirmed the telco was cutting its interim dividend payout significantly from the 15.5c it paid a year ago. The ordinary interim dividend has been slashed by more than half, from 15.5c to 7.5c a share, a move originally flagged in August.

But Telstra is also paying an “interim special dividend” of 3.5c a share, taking the total interim payout, to be handed out next month, to 11c.

Mr Penn said the interim dividend would still deliver $1.31 billion to shareholders — down $530 million from $1.84 billion a year ago. He affirmed Telstra expected dividends for the year to June to total 22c.

The telco chief said he thinks shareholders “understand and accept” it is the right decision as Telstra frees up cash to invest in new areas for growth.

The telco is fighting a number of headwinds, such as hot competition in the mobile market eroding its pricing power and the loss of about $3 billion to the NBN which is taking over the wholesale market the telco once dominated.

Retail shareholders rely on Telstra much more than many other companies for its yield. Despite the cuts, by the end of this year Mr Penn will have paid out about $13.7 billion to shareholders since he took over in the second half of 2015.