Telstra moves into the spotlight

An underwater expansion and what to expect in tomorrow's results.

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Telstra (ASX: TLS) may have been denied an acquisition of Adam Internet last month but it hasn't stopped Australia's telco giant from pursuing other avenues of investment.

According to The Financial Review Telstra is believed to be acquiring a stake in a cable called APX West, which runs from Perth to Singapore. The cable is to be laid by former Telstra executive Ted Pretty and will cost $200 million in total. Telstra is looking to acquire a 20% stake in the 4600 km cable because it is likely to use up to 25% of it.

This isn't the first time Telstra has funded such a deal, but with the National Broadband Network set to chip away at Telstra's competitive advantage the telco is looking at other ways to maintain its huge customer base. The company's outlook will be a focal point for tomorrow mornings annual report.

Not only will the company's 2014 growth and sales guidance be under the spotlight, capital expenditure, free cash flow and its dividend will also be hot topics. Many are predicting a rise in its legendary 28-cent dividend in the next two years and investors are hoping it will be consistently paying a 30-cent dividend by FY15.

For FY13, this Fool is predicting solid single-digit growth in total sales revenue to between $25.6 billion-$25.75 billion, up from $25.2 billion in FY12 and a net profit of around $3.7 billion, up from $3.4 billion last year.

UBS and Macquarie expect a higher (30 cent) FY14 dividend but expect its FY13 full year dividend to remain at 28 cents. Morningstar is not so bullish on the FY14 guidance but still predicts a 1 cent increase and a 31 cent dividend by FY15. UBS and Morningstar are also expecting special dividends to be paid from FY14 onwards.

Foolish takeaway

In the S&P/ASX 20 (ASX: XTL), Telstra remains one of the most lucrative investments for investors chasing yield. However the company's new focus on customer service and increasing number of subscribers to both mobile devices and bundled packages should see it retain its crown as number one telco for the foreseeable future.

With its legendary, fully franked 28 cent dividend, Telstra is the darling of Aussie investors. But with its share price skyrocketing over the past year, is Telstra past its prime? Click here for our brand-new report: "Is It Time to Sell Telstra?"

More reading


Motley Fool contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies. 

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »