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HTC shares under pressure on lower-than-expected dividend payout

2012/04/25 13:47:10

Taipei, April 25 (CNA) Shares of smartphone vendor HTC Corp. came under pressure Wednesday morning as its proposed dividend payout for 2011 fell below market expectations, dealers said.

Investors were also disappointed with the sales guidance for the second quarter HTC gave a day earlier and rushed to dump the stock soon after the market opened, they said.

Apple's solid earnings results for the quarter to March raised concerns that HTC would face fiercer-than-ever competition from the U.S. consumer electronics giant, they added.

As of 11:32 a.m. shares of HTC had fallen 1.46 percent to NT$471.50 (US15.98), off an early low of NT$464.50 with 8.42 million shares changing hands, while the benchmark weighted index was up 0.84 percent at 7,561.46.

HTC's board proposed at a meeting Tuesday to issue a NT$40 cash dividend per share for 2011 after the company posted earnings per share of NT$73.32 for the year.

"The stock underperformed the broader market right after the market opened, showing that many investors were not happy with the dividend payout ratio of about 54.5 percent," Concord Securities analyst Henry Sun said.

Sun said the market had expected that HTC would match the past payout ratio of around 70 percent and propose a cash dividend of NT$50 per share.

"But, I think the company wanted to keep more cash on hand to support its future expansion, in particular as it is planning to launch new models to boost sales," Sun said.

"Also, the NT$40 cash dividend translates into a dividend yield of about 8.36 percent based on the stock's closing price Tuesday. That's not a bad dividend yield at all," Sun said.

The analyst said the selling of HTC shares was a knee-jerk reaction to the disappointing dividend payout, but the stock recovered part of its earlier losses on some bargain hunting later in the session.

More pressing, Sun said, was the threat to HTC from Apple, especially after HTC's U.S. rival almost doubled its earnings for the previous quarter on the back of strong sales of the iPhone.

In an investor conference held Tuesday, HTC said it expected sales for the second quarter to rise to NT$105 billion, from NT$67.79 billion in the first quarter.

"The guidance was lower than an earlier market estimate of about NT$120 billion, prompting many investors to turn cautious about HTC's earnings outlook," Sun said.

The silver lining, Sun said, is that HTC has returned to a track of growth after a first quarter slump through its launch of the new "One" series of models.

"It is fair for the company to predict its gross margin will improve to 27 percent for the April-June period from 25.03 percent recorded in the previous quarter with sales on the rise," Sun said.

(By Frances Huang)