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SPARK NEW ZEALAND Message Board

  • shack4392 shack4392 Jan 12, 2010 8:05 PM Flag

    Starting a position?

    I am thinking of taking a position. With a pe of 7 and dividend of almost 10% how can you go wrong. do any longs believe this has any growth and upside potential Thanks

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    • I own substantial stock which I purchased for the great dividend. NZT is a CASH machine and will be able to pay the dividend whatever comes. As to price per share, that will grow slowly because all telecoms are in the path of media/communications changes. The regulatory problems with New Zealand Gov. are what are holding NZT back for the moment. The Company purposely wants to show that it will lose money.subscribers if the gov persists. Part of the downgrade is what NZT wants to put some pressure on the gov to ease up on regulations. NZT is an old company with big exposure in NZ and I do not worry about it survivng and prospering. It's a great bargain if you need income. The NZ dollar should appreciate vs the US dollar over time because their debt burden is nothing like the USA.

    • The dividend is actually not 9 or 10%.

      The historical payouts are listed here:

      http://www.adrbnymellon.com/dr_dividends.jsp?cusip=879278208

      If you take the last 4 quarters payouts, you get:

      .1277 + .1551 + .1755 + .1783 = .6366 / $8.66 (current price) = 7.351%

      The thing you should be aware of, however, is that the dividend is paid out in New Zealand (Kiwi) dollars then converted to U.S. dollars based on the exchange rate at the time of conversion. What this means is the dividend payments of this stock is subject to currency risk that other dividend paying companies based in the U.S. are not. As a consequence, you will see this stock go up and down as the NZ dollar goes up and down. NZT could be keeping the dividend constant but the actual amount received could fluctuate a lot if the currency rates changed.

      The stock has been going down because the NZ dollar has been falling lately:

      http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10621641

      It is logical to have a risk premium (in the form of a higher dividend) given that NZT investors have to take an additional currency risk to its U.S. counterparts. AT&T and VZ are paying 6ish% dividend yields but they don't have that currency conversion risk.

    • From what I've read, this company has a good, solid stream of income. They used to be the New Zealand Post Office, but was privatized in the early 1990s. Consequently, they are the dominant telcom for land lines in New Zealand. They are also the second largest mobile phone company in New Zealand and the third largest in Australia. Thus, they will will have stable revenue sources for the foreseeable future. Now, whether they have growth potential, too, is another thing. Companies like this are old, stodgy, stable entities, good for consistent revenues and dividends but not necessarily fast growing. Their customers complain that they are a big bureaucracy that doesn't respond quickly to changing consumer needs. But, don't rule them out for long-term growth, either. These stodgy old companies have a lot of cash on hand and can buy new technologies when they see that it is essential. If you want piece-of-mind and want to sleep at night, this is good company to own. And, who knows? Maybe they will show some growth, too?

    • If you decide to take a position in NZT, the next four weeks should give you a lower entry price than closer to the next dividend date (late February.) In general, dividend stocks have a share price run-up prior to the dividend.

 
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