To The Moon

🌟🌟🌟Telstra $TELSTRA GROUP LTD(TLS.AU)$ is Australia's largest telecommunications company with Assets Under Management of AUD 52.68 billion.  It has recently surged to its 52 week high and closed at AUD 4.58 on Friday.  Is it still a Buy?  Let's check out its latest earnings. 

On February 20 2025, Telstra delivered a strong set of results in H1 FY 25 with EBITDA up by 6% to AUD 4. 2 billion.   Its Net Profit After Tax was AUD 1.1 billion, up 7.1% compared to previous year.  Telstra's Earnings per share was 8.9 cents, up 6% year over year.

This strong set of results reflected growth across its business with strong cost control and disciplined capital management. 

Telstra's mobile business has continued to perform strongly with EBITDA growth of AUD 92 million.  This growth was driven by more people choosing its network with 119,000 net new mobile handheld customers.

Telstra is also responsible for building and operating telecommunications networks.  Revenue comes from a range of activities include fixed broadband, mobile, data and IP and digital media.  Telstra has also expanded outside Australia to over 20 countries where it provides services to governments and businesses. 

The competitive advantage that Telstra has over its competitors lies in its reach and scale, providing coverage to 99.6% of the Australian population and 5G services to over 85%.

Why invest in Telstra? 

1. Resilient and Diversified Earnings 

Telstra's core operations generate consistent cash flows due to its dominant position.  This helps Telstra to offset economic volatility and external pressures such as tariffs or global market swings. 

Telstra's ability to grow its mobile revenue, partly due to its incremental price increases, had bolstered earnings.  Even during challenging periods, its recurring revenue model and diversified service offerings provide a stable foundation for future growth. 

2.  Attractive Dividend Yield 

A key factor for income focused investors is Telstra's robust dividend policy.  Telstra has a good track record of rewarding shareholders with regular dividend increases, achieving yields that are attractive especially when combined with franking credits. 

The current dividend yield is 4.04%.

The Board of Directors has resolved to pay a fully franked interim dividend of 9.5 cents per share at the recent H1 FY 25 meeting.  This represents a 5.6% increase compared to the previous corresponding period. 

Telstra has also announced a share buy back of up to AUD 750 million which is consistent with its capital management framework.  This demonstrates Telstra's confidence in its financial strength and outlook. 

3.  Strategic Position and Market Leadership 

Telstra's well established network and brand recognition continue to serve as competitive advantages.  As Australia's leading Telco, it benefits from customer loyalty and a high penetration rate across residential and enterprise segments. 

Moreover Telstra's investments in the next generation 5G and fiber optic infrastructure ensure that it remains at the forefront of the telecommunications landscape. 

This strong infrastructure not only supports existing revenue streams but also paves the way for new digital services and improved operating margins. 

4.  Attractive Valuation amid Global Uncertainty 

In periods of global volatility, investors seek stable, defensive stocks.  Telstra's valuation, particularly when viewed alongside its historical earnings stability and dividend growth, makes it an appealing option. 

Furthermore, anticipation of lower cash rates and supportive monetary policies could enhance its relative attractiveness compared to more cyclical sectors. 

As a result, some analysts said that Telstra maybe undervalued given its resilient performance and promising outlook. 

5. Future Growth Through Diversification 

Beyond its traditional telecom business, Telstra is actively diversifying into adjacent sectors such as cybersecurity, enterprise connectivity and digital health. 

This multifaceted approach stands out against its competitors such as Optus which have traditionally placed stronger emphasis on consumer pricing and market share. 

The ability to generate revenue from non traditional Telco sectors is designed to help insulate Telstra from the cyclical nature of core telecoms earnings, positioning it as a more balanced player in the evolving digital economy. 

Conclusion 

Investing in Telstra offers an opportunity to gain exposure to a stable blue chip with a proven ability to generate steady earnings and distribute attractive dividends. 

Telstra's strong market position, coupled with strategic investments in network and digital innovation, provides a solid foundation for sustainable growth. 

For investors seeking a defensive asset in uncertain times, while still capturing growth potential through diversification, makes Telstra a compelling stock to invest as part of a diversified portfolio. 

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