Investors buying China Telecom shares in its upcoming initial public offering (IPO) could receive a dividend of six HK cents to seven HK cents a share, implying a dividend yield of more than 4 per cent, according to sources close to the company.
The payment would see China Telecom distribute about HK$5 billion or 30 per cent of its profits for this year, as a sweetener for investors.
China Telecom previously intended to distribute 20 per cent of its profits as dividends, with an estimated dividend yield of between 2.5 per cent and 2.7 per cent.
Sources close to China Telecom said the giant fixed-line carrier and its underwriting syndicate were seeking ways to sweeten the offer to attract buying interest amid poor stock market sentiment. Details of the offer would be fixed tomorrow.
China Telecom plans to sell 16.8 billion H shares and American depositary shares to foreign investors, raising US$3 billion to US$4 billion.
A banking source said investors were asking for a higher dividend yield and lower price after seeing China Mobile shares fall sharply in the past month.
'There are two ways of doing it. One is to set a dividend payout ratio, another way is to fix the dividend amount and fund management can calculate the dividend yield based on the offer price,' said a source close to the underwriting syndicate.