Queenstfarmer, your point is well made and I accept it as a broad brush argument. However I do feel that in the particular case of PGW this broad brush creates a messy painting.
If you go to p12 of the HY2012 report, the Condensed Interim Statement of Financial Position, you will see that total assets of PGW amount to $1,066,012,000. If you take my projected after tax profit for FY2012 of $22.8m then you can work out the return on total company assets:
$22.8m/$1,066.0m= 2.14%
The shareholders have had to borrow money to buy some of these assets. We don't know exactly how much interest PGW are paying for their loan money. We do know it is below 8% because PGW have recently repaid their convertible redeemable notes issued to them by Agria at that rate because they could borrow that some money from the bank at more favourable rates. However I am willing to bet those bank interest rates are nowhere near as low as 2.14%.
I would guess that PGW are borrowing money at around 7%, and using that capital to earn an after tax income of 2.14%. The way I read it, this means PGW is going backwards by the difference (about 5%) based on all their borrowed long term capital while that long term loan remains outstanding. I don't think it makes sense to borrow money at a relatively high rate when the return on those funds for shareholders is so far below the rate of borrowing. This is why I favour repaying the debt at the expense of dividends. In theory the increase in share price due to debt reduction should more than compensate shareholders for any dividend foregone.
Telecom I believe has a much higher return on assets and dare I say it, lower borrowing costs. So the same argument does not apply there.
SNOOPY