BT Group gains on reports of dividend hike

28th Oct 2013 11:00

BT Group's shares climbed on market speculation that it will raise its dividend by more than 10 per cent when it reports its half year results on Thursday.The company's results are expected to reflect a growth in its mobile business and weak performance in TV, according to Nomura."An Openreach re-rating and increasing appreciation of BT's mobile potential are set to drive further multiple expansion in 2014, in our view," the broker said in a note to investors last week."In the near term, though, the impact of BT Sport and the Champions League outcome are more obvious focus points that are less likely to impress investors. That said, analyst expectations for line loss improvement remain muted, which reduces the scope for disappointment."The analyst added that BT's prospects for improving growth over the next year remain excellent so long as Openreach metrics continued to be robust and Global Services provide exposure to UK and European economic recovery."Valuation has risen to 5.8x 2014E EV/EBITDA and 8.7% FCFE yield in a strong telecom sector, and we continue to prefer BT's prospects for structural growth over the medium term. We forecast a three-year CAGR of 5.1% out to FY17. Our rating is Buy."Revenue in the first half is expected to fall 0.8% to £8.89bn, while pre-tax profit will drop 2.4% to £1.15bn, according to data from The Motley Fool. However, an upbeat outlook for the second half is predicted to prompt a hike in the dividend, market reports suggest."We expect growth to turn meaningfully positive in H2 (1.8% forecast)," Nomura said. Shares in the company have out-performed the FTSE 100 over the past six months, rising 28% compared with a 4% increase for the index.At 12:00 on Monday shares rose 0.84% to 362.10p. RD