Telecom NZ's juicy 7% dividend

A large, dividend paying telco to add to your watchlist

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

Telecom Corporation of New Zealand (ASX:TEL) is paying a juicy 7.1%, partly franked dividend, for those investors looking for yield.

Telecom has reported a NZ$236 million profit for the 2013 financial year, or earnings per share of NZ 13 cents, but is paying a NZ 16 cent dividend, partly franked, and expects to pay a similar amount in 2014. The company saw revenues of NZ$4.2 billion in 2013, a fall of 8% from the previous year, mainly due to a decline in fixed line revenues – something Telstra Corporation (ASX:TLS) in Australia is also facing.

Telecom is mainly a retail services provider in New Zealand, and has 900,000 retail and small business fixed broadband customers, as well as more than 1.8 million mobile customers in New Zealand, along with 70 wholesale customers.

The company is not just active in New Zealand, but also owns AAPT and other telco assets in Australia. What may surprise many, is that AAPT owns 11,000kms of interstate fibre networks, as well as data centres in the major capital cities. AAPT primarily focuses on business customers in Australia, with competition from Telstra and Singapore Telecommunications' (ASX:SGT) subsidiary Optus proving too hot in the retail sector. AAPT boasts more than 5,000 business and 300 wholesale customers in Australia.

Telecom also holds a 50% share of the Southern Cross Group, which owns and operates the Southern Cross trans-pacific submarine cable, linking Australia and New Zealand to the west coast of the United States. Customers, such as Vocus Communications (ASX:VOC) lease space on the cable, which is then on-sold to other customers.

Since splitting itself into Telecom (retail) and Chorus (ASX:CNU) (network services), Telecom has been forced to revolutionise its business. This process is still ongoing, and while the company is rolling out new services, such as a 4G network in New Zealand, Telecom faces significant competition on its home turf, as well as in Australia.

Foolish takeaway

Telecom may see a number of years where it struggles to grow earnings materially. But with some significant assets in both Australia and New Zealand, and paying a 7% dividend, investors may want to put Telecom on their watchlist.

Interested in our #1 dividend-paying stock? Discover The Motley Fool's favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of "The Motley Fool's Top Dividend Stock for 2013-2014."

More reading


Motley Fool writer/analyst Mike King owns shares in Telstra and Vocus.

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 »