Telstra share price higher on earnings beat and surprise dividend increase

Telstra's shares are having a strong day on Thursday. Here's why…

| More on:
A woman with strawberry blonde hair has a huge smile on her face and fist pumps the air having seen good news on her phone.

Image source: Getty Images

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

Key points

  • Telstra's shares are pushing higher on Thursday morning
  • This follows the release of a full year result which outperformed the market's expectations
  • A surprise dividend increase has also given its shares a boost

The Telstra Corporation Ltd (ASX: TLS) share price has been a solid performer on Thursday.

In morning trade, the telco giant's shares are up almost 2% to $4.08.

Why is the Telstra share price pushing higher?

Investors have been bidding the Telstra share price higher after the company's full year results impressed the market.

In case you missed it, the company reported a 4.7% year over year decline in revenue to $22,045 million but an 8.4% increase in underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to $7,256 million.

As a comparison, a note out of Goldman Sachs reveals that it was expecting underling EBITDA of $7.13 billion and the consensus estimate was $7.17 billion. The company has beaten both estimates, which helps explain why the Telstra share price is having such a good day.

Telstra's operating earnings growth was underpinned by an impressive performance from its mobile business. It reported EBITDA growth of 21.2% or $700 million thanks to the addition of 155,000 net retail postpaid handheld services, 2.9% postpaid handheld average revenue per user (ARPU) growth, and 6.4% mobile services revenue growth.

Pleasingly, more of the same is expected for Telstra's underlying EBITDA in FY 2023. Management has provided underlying EBITDA guidance of $7.8 billion to $8.0 billion. This represents a 7.5% to 10% increase year over year.

Dividend surprise

Also giving the Telstra share price a boost today was news that its board has decided to increase its dividend for the first time in seven years.

Telstra will be paying shareholders an 8.5 cents per share fully franked final dividend next month. This is up from 8 cents per share previously and means a full year dividend of 16.5 cents per share.

Telstra's CEO, Andy Penn, revealed that this increase reflects "the confidence of the Board" and "the recognition by the Board of the importance of the dividend to shareholders."

I'm not aware of a single broker that was expecting an increase today, so this has been a very pleasant surprise for the market and shareholders.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Communication Shares

a woman in business wear looks at her phone against the window of a high rise space with a city landscape view of tall buildings outside.
Communication Shares

Still under $4 despite strong recent results, is Telstra stock too big a bargain to pass up?

Is it time for this telco giant to break free? Let's see what analysts are tipping for the telco giant.

Read more »

A couple makes silly chip moustache faces and take a selfie on their phone.
Dividend Investing

Invested $5,000 in Telstra shares in 2021? Here's how much passive income you've already earned

Atop the share price gains, how much passive income have investors earned from their Telstra stock?

Read more »

4 teenagers playing mobile game
Communication Shares

Are brokers bullish or bearish on Telstra shares in November?

Are analysts feeling bullish or bearish about the telco giant's shares?

Read more »

A happy man and woman sit having a coffee in a cafe while she holds up her phone to show him the ASX shares that did best today.
Communication Shares

Where will Telstra stock be in 5 years?

Profit forecasts show a change is coming for the big telco.

Read more »

A smiling businessman in the city looks at his phone and punches the air in celebration of good news.
Dividend Investing

Passive-income champion: One ASX stock yielding more than 4%

Brokers like the dividend potential from this stock.

Read more »

Ordinary Australians waiting at the bus stop using their phones to trade ASX 200 shares today
Communication Shares

Telstra stock: Buy, hold, or sell?

What are analysts recommending investors do with this telco giant?

Read more »

A woman is excited as she reads the latest rumour on her phone.
Earnings Results

Guess which ASX 300 stock just reported a 21% jump in a critical measure

Growth is the word for this telco, and investors like what they see in the company's Q1 numbers.

Read more »

A cool young man walking in a laneway holding a takeaway coffee in one hand and his phone in the other reacts with surprise as he reads the latest news on his mobile phone
Communication Shares

Under $4, do Telstra shares look an irresistible bargain?

Is this an opportunity calling too good to ignore?

Read more »