Qwest Communications International Inc. jumped the most in more than a year in New York trading after reinstating its dividend, soothing investors’ concerns about the company’s strategy.
Qwest, the provider of local phone service for 14 western U.S. states, announced the 32-cent annual payout yesterday. The size of the dividend, Qwest’s first since June 2001, exceeded analysts’ estimates.
With an early Christmas gift in hand, shareholders are now waiting for a Dec. 17 briefing, when Chief Executive Officer Edward Mueller will share the results of his four-month review of the company’s strategy. Excluding today’s rise, the shares have fallen 18 percent since he joined Qwest in August.
“This will be his chance to really start to overcome that skepticism and spell out his game plan,” said Janco Partners Inc.’s Donna Jaegers. The Greenwood Village, Colorado-based analyst, who expects the shares to perform in line with their peers, anticipated a dividend of as much as 24 cents a share.
The size of the dividend suggests Denver-based Qwest won’t embark on a major spending project, such as offering video over its phone lines, and that has reassured investors, Jaegers said.
Qwest rose 23 cents, or 3.3 percent, to $7.19 at 9:40 a.m. on the New York Stock Exchange after earlier climbing as much as 5.6 percent, the biggest gain since August 2006. Based on yesterday’s price, the dividend yield is about 4.6 percent, more than double the average of the Dow Jones Industrial Average.
Investors want details on Qwest’s spending plans and its strategy to compete with cable companies for high-speed Internet users, Jaegers said.
Profit History Profit missed analysts’ estimates last quarter as Qwest struggled to win more business with companies and as prices for phone calls fell. The company added 111,000 high-speed Internet subscribers in the third quarter, down from 175,000 the year before.
Sales growth has stagnated for six straight quarters as customers switched to service with cable companies such as Comcast Corp., which offers discounts on packages of Internet, phone and television service.
Midway through the quarter, Mueller replaced Richard Notebaert, who retired. Mueller, 60, has offered few details about his plans for the company, telling analysts in an October conference call that he needed time to complete a review.
Investors such as Thomas P. McIntyre, president of McIntyre Freedman & Flynn, criticized Mueller for not sharing enough details. On the October call, Mueller said the company would spend $300 million next year to increase Internet speeds to homes, refusing to say how total spending would change.
The conference call prompted McIntyre to sell his shares.
