Bezeq Israeli Telecommunication Corp. advanced to a two-month high on investor expectations of dividend growth after the country’s largest telecommunications provider issued 2013 earnings forecasts that exceeded estimates.

Shares in Tel Aviv gained 2.6 percent to 4.75 shekels, the highest since Dec. 6, at 1:53 p.m. in Tel Aviv in 71 percent of the three-month average daily volume. Bezeq led gains in the TA-25 benchmark index, which added 0.5 percent.

“Investors are buying shares because of the company’s expected dividend payments in 2013,” Ilanit Sherf, an analyst at Psagot Investment House Ltd. said today by phone. “The share is also benefiting from the guidance-positive momentum.”

Bezeq shares have advanced 12 percent since the company issued 2013 guidance on Feb. 5, making the stock the second-best performer this year on the TA-25 index. The Tel Aviv, Israel- based company said that 2013 profit would come in between 1.7 billion shekels ($461 million) and 1.8 billion shekels, higher than the 1.54 billion shekels forecast by a mean estimate of three analysts compiled by Bloomberg.

Bezeq is expected to stick to its dividend policy and pay a 1 billion shekels special dividend in 2013, Goldman Sachs Group Inc. (GS) wrote in an e-mailed note dated Feb. 11, initiating coverage with a buy rating. Goldman expects Bezeq to pay an annual dividend yield of approximately 13 percent in 2014 and 2015.

Bad Performer

Bezeq’s shares were the second-worst performer in the TA-25 benchmark index in 2012, dropping 39 percent as Bezeq faces increased competition in the wireless and fixed-line sectors. Cellcom Israel Ltd (CEL)., the country’s largest mobile-phone provider, was the worst performer.

Hot Telecommunication System Ltd. and Golan Telecom entered the wireless market in May leading to greater price competition. Bezeq provides mobile phone services via its Pelephone Communications Ltd. unit. Bezeq is also set to face competition in the fixed-line market as the Israel Electric Corp. sets up a fiber-to-the-home network and as government seeks to introduce a wholesale fixed-line market.

B Communications Ltd., which has a 30.97 percent stake in Bezeq, gained 5.2 percent in 75 percent of the three-month average daily volume. Internet Gold-Golden Lines Ltd., which has a stake in B Communications, advanced 2.5 percent in 1.3 times the three-month average daily volume.

To contact the reporter on this story: Shoshanna Solomon in Tel Aviv at ssolomon22@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net