Any investors looking to buy a steady stock with a great income stream should consider Telstra Corporation Ltd (ASX: TLS). Under the stewardship of chief executive David Thodey it's in the hands of steady management and there are a lot of reasons to confidently add it to your portfolio. Here are five of the best.
- Fully franked dividends. These come in the form of an expected 29 cents per share payout in FY 2014. This means that when Telstra sells for $5.43 it trades on a yield of 5.33% which when grossed-up to account for the tax credits equals around 8%. That certainly smashes the returns on cash equivalents like term deposits.
- Potential share buyback. This is a prospect that has been mooted by investment analysts and the media as a way for Telstra management to constructively spend the mountains of cash sitting on its balance sheet. If it cannot find suitable ways to invest for growth a share buyback is a real possibility, less shares on issues will automatically equal earnings per share growth and likely appreciation in the share price.
- Asian growth. Admittedly,Telstra is unlikely to shoot the lights out on the growth front due to its size and competitive markets in which it operates. Over the long term though CEO David Thodey is targeting Asia and its growing middle class as the perfect new market to grow revenues and profits. In the most recent half year revenue from its International business was up 28.3%.
- The Network Application Services (NAS) division. This is basically Telstra's new technology division offering modern internet services like clouding, digital media and better online security. In the most recent half year revenue from its NAS business was up 29.3%.
- Growth in mobile data use. At home Australians have been flocking to Telstra's 4G mobile network due to its reputation as the fastest and best. It is obvious to anyone and everyone that people are spending more and more times accessing data on their smartphones. This is a long-term trend set to continue with the premier providers like Telstra set to benefit the most over the long term.
Selling for $5.43 Telstra trades on 17.7 times 2013's earnings per share of 30.6 cents. The share price is likely to receive strong support going into its ex-dividend date of August 27. Any serious price weakness after this would prove an opportune time to grab a slice of this telco giant's positive future.
