The chairman of KGHM Supervisory Board Mr. Lagowski said yesterday, shortly before market close, that he would see the dividend from 2006 earnings closer to PLN14 per share, implying 80% payout ratio and 16.2% dividend yield, rather than PLN7 per share proposed by the management two days ago, on the back of State Treasury pushing for higher payout.
Our view: We see the likelihood of a 80% dividend payout ratio in KGHM as high. The company would have no problem in paying out that amount, considering its substantial net cash position and cash generation potential. Nevertheless, we would expect a neutral market impact of the news, as the chairman statement reiterates his old position We reiterate our Buy rating for the stock.