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KeyTech slashes dividend by 25%

KeyTech today announced that it is slashing its dividend by 25 percent.

The company, which owns Bermuda Telephone Company and Logic Communications, said its next quarterly dividend payable next month would be reduced to nine cents from 12 cents.

In a statement, the company said its directors had decided on the reduction “in response to increased investment in subsidiaries over the past year”.

KeyTech CEO Lloyd Fray said: “Although we achieved synergies during the year, the North Rock amalgamation and TeleCayman acquisition resulted in one-time costs associated with these business changes.

“In addition, we have invested in Logic TV, which launched in January with high start-up costs; BTC's infrastructure in order to increase access speeds and develop a wholesale product in order to comply with regulatory requirements; aerial fibre deployment to support Logic TV and triple play services in Cayman as well as corporate market growth and the increased ICOL fees and the cost of dealing with regulation in general.

“Historically we have had a high dividend rate, however, the directors felt it was prudent to use the company's funds to strengthen our position in the marketplace and reduce the dividend.”

KeyTech Ltd shares closed at $5.11 on Wednesday in Bermuda Stock Exchange (BSX) trading, meaning the 12-cent dividend was yielding a handsome 9.4 percent annualised. The reduction cuts the yield to just over seven percent on Wednesday's closing price.

The company has been paying a quarterly dividend of 12 cents per share for the past four years, after it was reduced from 15 cents in April 2010.

KeyTech's move comes just days after fellow BSX-listed utility Ascendant Group Ltd, parent company of Belco, announced it was reviewing its dividend. Its April dividend will be 21.25 cents a share, representing an annualised yield of 11.3 percent on Wednesday's closing share price of $7.55.

Relatively high dividend yields can be the result of a company's share price falling, rather than dividend payouts increasing. KeyTech shares have fallen 44 percent over the past four years, while Ascendant shares have tumbled 48 percent.

Ascendant's major challenge has been shrinking electricity sales during the recession, while KeyTech has been dealing with the fall in demand for landline services in the light of a broad-based migration to wireless services in recent years.

The KeyTech dividend is payable on April 15, 2014, to shareholders of record as of April 3, 2014.

KeyTech CEO Lloyd Fray

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Published March 27, 2014 at 5:04 pm (Updated March 27, 2014 at 5:34 pm)

KeyTech slashes dividend by 25%

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