When it comes to ASX dividend stocks, it's hard to go past Telstra Corporation Ltd (ASX: TLS).
Not only is it a frontrunner in our increasing use of internet-enabled devices, it also offers a reliable fully franked dividend yield.
However there's more than one reason to keep holding the telco's shares in your portfolio for the long term.
1. Defensive characteristics. A large part of Telstra's success as a reliable dividend stock can be put down to its defensive characteristics. Indeed its superior telecommunications networks compel individuals and businesses to pay extra for its services. This in turn drives higher profit margins and cash flow, allowing it to reinvest in new infrastructure and further widen its competitive advantage.
2. Network Application Services. One of the areas Telstra is investing heavily in today, is its Network Application Services, or NAS, business. Offering cloud computing, unified communications and more, the NAS business has been growing rapidly in recent years and appears likely to continue to do so well into the future.
3. Machine-to-Machine communication. As noted above, Telstra is in poll position to benefit from a rise of internet-enabled devices. This trend is often referred to as Machine-to-Machine (M2M) communication or the Internet of Things (IoT). While concerns over mobile growth have been evident amongst analysts in recent years, in 2014 Telstra's M2M revenues jumped 12.2%.
4. Asia. Just north of Australia, opportunities abound for companies willing to take the extra risk of expanding into Asia. Telstra has many years of experience in the region through its huge infrastructure investments, previous stake in Hong Kong mobile provider CSL and a majority interest in China's largest online automotive website, Autohome.com.cn. By 2020, CEO David Thodey hopes to draw up to a third of revenues from the region.
5. The National Broadband Network. Telstra is going to be the biggest beneficiary of the government's revised NBN rollout. Not only will it be paid its $11 billion, which it can use to invest in more advanced technologies, it also has the opportunity to play a part in the NBN's rollout.
Buy, Hold, or Sell?
Telstra has a bright future ahead of it and pays a solid dividend yield. Therefore, shareholders have many reasons to keep holding. Unfortunately for potential investors the market knows how good it is and has priced its shares accordingly. Waiting on the sidelines for a lower price to enter the stock is advisable.
