The share market has been, and will hopefully continue to be, the best place to invest your money over the long term, averaging around 10% a year when looking at multi-decade periods.
You could have created that solid investment return by just investing in reliable blue chips on the ASX, businesses like Woolworths Limited (ASX: WOW) and BHP Billiton Limited (ASX: BHP). However, I wouldn't recommend these companies at the current prices and their likely lacklustre future.
There are a number of large businesses that I do think will grow reasonably over the coming years, whilst providing delightful dividends in the meantime, here is one of those:
Telstra Corporation Ltd (ASX: TLS)
Telstra is Australia's largest telecommunications company with a market capitalisation of $60 billion. Its earnings haven't grown much over the last decade, but it has provided investors with a big, reliable dividend – which is an important part of any shareholder's total return.
It's in a transition phase at the moment, changing over from its old copper network and moving more customers onto the NBN whilst receiving cash from the government for its old network. It's also receiving contracts to do various works on the NBN infrastructure too.
There are three main reasons why I think Telstra will grow over the medium to long term:
Mobile market dominance
It's still the dominant mobile player and continues to grow its total customers. In FY16 it grew mobile users by 560,000, which helped grow mobile earnings before interest, tax, depreciation and amortisation by 3.2%.
Internet of Things
The number of devices connected to data in some way is expected to explode over the next decade, not just tablets and handheld devices but fridges, TVs and lighting systems (think 'Internet of Things'). When automated cars come onto the road, they will also need a lot of data for navigation and other in-car related activities (e.g. watching Netflix).
5G Network
Telstra's future 5G network could be so fast that it could make the NBN essentially obsolete. This future network may steal a sizeable percentage of the broadband market, where Telstra isn't as dominant a player.
Risks
There are a couple of risks as an investor. It had a 98% payout ratio in FY16, which doesn't give it much wriggle room at all and doesn't leave much to reinvest back into the business.
It has warned investors it will be spending a few billion on upgrades and maintenance for its network, which will make a dent in profit.
There's always a risk, as a technology company, that what it offers becomes obsolete but it appears to be doing the disrupting rather than being in danger at the moment.
Time to buy?
Telstra is trading at 15x FY17's estimated earnings with a grossed up dividend yield of 8.8%. This isn't cheap for a low growth business, but it could be one of the most reliable blue chips over the next few years.
