If you haven't already, it's time to add Telstra Corporation Ltd (ASX: TLS) to your watch list.
While a list of its alluring characteristics could go on for days, here are three reasons to keep a close eye on Australia's largest telecommunications company.
- Mobiles
Telstra is Australia's leading mobile carrier, with some 16 million services at June 30, 2014. That compared to 12.2 million just two years earlier. Telstra isn't simply pursuing growth for growth's sake either – its profit margins are still excellent.
Its dominance in mobiles appears likely to continue for some time yet.
- Dividends
Having big margins and market dominance regularly go hand-in-hand with enviable cash flows. Telstra produces excellent cash flows from operations, and ultimately this affords it a big – and reliable – dividend yield.
Analysts are currently forecasting it to pay a dividend equivalent to 4.7% fully franked. That stands in contrast to big bank term deposits yielding around 2.3% to 2.5%.
- Diversification
Telstra is no one-trick-pony. Its dominance extends to many products, and geographically.
Although Australia's shift to the NBN Co's fibre network will force Telstra to compete on price across fixed line products, it currently spends around $3.6 billion in capital expenditure annually. Therefore, any competitive advantage is unlikely to dissipate overnight.
Is it time to buy Telstra shares?
Despite its compelling features, at today's price of approximately $6.40, Telstra is not a standout buy. I've previously estimated Telstra's intrinsic worth to be around $6.17 per share. Therefore, investors should keep it on their watchlists, and avoid buying in until prices drop meaningfully below that figure.
