Insatiable appetite for yield has driven Telstra Corporation Ltd's (ASX: TLS) share price to another 12-year high of $5.74. Shares in the telco were up more than 1.2% in lunchtime trading.
Just a week ago, Telstra announced a 14.6% rise in net profit, and a final dividend of 15 cents, up from 14 cents in the previous year. The total full year dividend of 29.5 cents, fully franked, puts Telstra on a dividend yield of 5.1%. That grosses up to 7.4% to include franking credits, totally outclassing term deposits.
What has perhaps surprised investors was the strong growth in earnings.
Telstra was meant to be a low growth company, but a 14.6% rise in net profit, shows the old warhorse has plenty of levers to pull to generate growth. And future growth is more likely to come from some of its smaller operations such as Network Application Services (NAS) and the international division. They recorded revenue gains of 27.8% and 15.1% respectively in the last financial year.
Investors were also clearly happy with Telstra's announcement of a $1 billion off-market buy-back, which offers remaining shareholders more value per share.
Add in its continued dominance in the mobile space over rivals Optus – owned by Singapore Telecommunciations Ltd (ASX: SGT) and Vodafone – partly owned by Hutchison Telecommunications Ltd (ASX: HTA), and it's hard to see Telstra lose its advantage.
As I warned in this article last month, if you were thinking of selling then, now is probably not the time to sell either.
For those investors not in Telstra, you may have missed a big chunk of the gains as the company's shares climbed from $2.90 in late 2011 to $5.74 currently, but there's no reason why the giant telco can't replicate those gains over the medium to long-term.
