WDS' dividend delights

What investors won’t do for a few extra cents of dividend. This obsession worked well in engineering contractor WDS’ (WDS) favour today with its shares surging to a near two-year high despite its profit miss.

Management wowed investors with a fully franked special ordinary dividend of 2.75 cents a share on top of its regular final 3.25 cents a share ordinary final dividend.

This takes its 2012-13 dividend payout to 7.5 cents, a 173% increase from the previous year’s 2.75 cents a share distribution.

Investors scrambled to buy the stock, sending it up by a one-day record 29% to 78.5 cents this afternoon.

WDS is promising more dividend delights too. Its strong cash flow and substantial franking credits pool has prompted management to start paying dividends every quarter instead of half yearly. It will also lift its payout ratio to “at least 80%” from its current target of between 40% and 60%.

If that wasn’t enough to keep investors onside, management is guiding for “modest growth in profit” for 2013-14 thanks to strong demand for its services from the Queensland gas sector. Strength in this division is tipped to offset the challenging outlook for mining services.

With news like this, it’s hardly surprising that investors glossed over the 3.6% drop in WDS’ full year net profit to $8.25 million or the drop in margins as revenue stayed flat at $352 million.

The figures were below consensus expectations of $8.56 million and $354.4 million, respectively.

But then again, who’s listening?

WDS is part of the Uncapped 100.

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Source: Bloomberg