Sky Network Television’s [NZX:SKT] strong cashflows should continue to reward investors with solid dividends in the short term even as the company spends up in response to competition.
The key question looking further out is whether the company can convince the public that its expensive product upgrade is good enough, Hamilton Hindin Greene investment advisor Grant Davies told NBR Radio’s Andrew Patterson.
“I think Sky TV will do everything in their power to maintain that gross dividend yield, which at the moment is over 9% and attractive to some investors in the low interest rate environment.
“Longer term, it depends on how they get on making the transition to the new environment. Competition is coming in and Sky will have to take them on, head on. It will be under pressure – no two ways about that.”
Sky is under further pressure after a tepid response from subscribers to its software upgrade to an on-demand service andcontinuing issues with its Sky Go online sports offering.
“Whenever there is a big All Blacks match on or New Zealand event they struggle to keep up with demand,” Mr Davies says. “With Netflix to compete with, they need to get the public believing they can operate in that space.”
Meanwhile, Mr Davies also shares his views on the market’s exposure to falling dairy prices, in particular the banking sector, and Fletcher Building’s [NZX:FBU] $315 million acquisition of Higgins Group.