The Telstra Group Ltd (ASX: TLS) share price has hovered close to $4 over the past three years, as shown in the chart below. After failing to deliver much capital growth in recent years, now may be the time to consider this leading telecommunications company.
Telstra operates in many different areas, including mobile, NBN connections, telco infrastructure, cybersecurity, digital health and so on. This means it has different growth levers it can pull.
I can think of at least three factors that make the Telstra share price an appealing investment.
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Leading mobile position
Telstra boasts that it has Australia's largest mobile network, with 99.7% population coverage. It has added 240,000 sq km of coverage since FY21 and has around 1 million sq km more coverage than the nearest competitor.
The company's 5G footprint covers around 89% of the population, with a target of 95% by FY25. Telstra continues to invest in its 5G network to help it stay ahead of the competition.
The strength and reliability of its network attract a growing number of subscribers and enable Telstra to keep increasing its prices without losing many customers.
During the 2024 financial year, the company grew its mobile handheld users by 4.1% year over year, adding 562,000 mobile users in numerical terms. The business also grew its prepaid, postpaid, and wholesale users.
Strengthening profit
One of the most important elements of a winning business is profit margins that increase as it grows. This shows that the business is benefiting from its growing scale.
Investors usually value a blue-chip company based on its net profit rather than revenue, so it's good news if the profit margins are rising.
Telstra's overall revenue grew by 1% in FY24, and the underlying net profit NPAT grew by 7.5% to $2.3 billion. This was driven by the mobile division, with revenue rising by 5% to $10.7 billion and operating profit (EBITDA) going up 9% to $5 billion.
In the coming years, I believe Telstra's ongoing subscriber growth will help the business continue to grow profit and unlock more operating leverage.
Growing profit can also fund dividend payments.
Rising dividends
Dividends can play an important part in a company's overall returns, particularly if the business is in the mature part of its lifecycle.
When profit increases, the company's board of directors can increase the dividend payment to shareholders.
During FY24, Telstra grew its annual dividend per share by 5.9% to 18 cents. At the current Telstra share price, it has a grossed-up dividend yield of 6.5%.
The forecast on Commsec suggests the Telstra annual dividend per share could grow to 19 cents, which would gross up the dividend yield to 6.8%.
With a solid and growing dividend and rising profit, the company has a promising future. I'd be happy to invest at the current Telstra share price.
