Telstra Corporation Ltd beats expectations, lifts dividend

Shareholders will be laughing all the way to the bank with a higher dividend and better than anticipated growth.

| More on:

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

Shares in Telstra Corporation Ltd (ASX: TLS) are trading higher this morning as the market digests a better-than-expected half-year report. In the six months to 31 December 2013, group revenue increased 4.1% to $12.6 billion, whilst net profit jumped 9.7% to $1.7 billion – when compared to the half-year ending 31 December, 2012.

Rather than top and bottom line growth, many shareholders would have been focused on any mention of a dividend increase. Today, faithful shareholders will be excited by the prospect of a slightly higher 14.5 cent interim dividend – the first change to the telco's legendary payout in eight years.

Standout performers in the half year were as follows:

  • Network Application Services (NAS) revenue up 29.3% – Which includes Cloud (up 28.6%), Unified Communications (up 27.6%) and Managed Network Services (up 64.8%).
  • International revenue up 28.3% (local currency 15.5%) – Including the group's sold Hong Kong CSL mobiles business (up 13.2%), China Digital Media (up 53.8%) and Global Connectivity and NAS (up 9.7%).
  • Mobiles – Revenue up 6.4% to $4.861 billion, customers up 739,000 to 15.8 million, improved EBITDA margin to 39%.

The group continued to add to its huge client base, proving its customer-first strategy is paying dividends. In addition to mobiles, the number of customers in fixed retail, bundle and IP showed strong growth.

Key Group Metrics

Along with the bumper results and a higher payout, Telstra's dominance in key markets has enabled it to improve upon a number of key financial metrics and become a more efficient company.

  1H13 1H14 Change
Earnings Per Share (cents) 12.6 13.7 8.7%
Dividends (cents) 14 14.5 3.6%
Return on Equity (ROE) 27% 26.8% -0.2%
Return on invested capital (ROIC) 13.5% 15.2% +1.7%
Gearing 53.4% 51.4% -0.2%

Data Sourced from Telstra 1H 2014 Report, 13 February 2014

Commenting on the results and outlook for the remainder of FY14, CEO David Thodey said: "These are a solid set of results and we see good opportunity going forward… Importantly, we are on track to meet our full-year guidance."

He said the telco plans to grow its superior 4G network to 85% of the population by Christmas, thanks to upgrades at 1,500 base stations throughout the country.

Foolish takeaway

Shareholders in Telstra will be very pleased with today's results. Growing its huge customer base ahead of expectations and increasing the dividend is all you could expect from the telecommunications heavyweight. International operations and Network Services continue to grow rapidly. Although the NAS and International divisions represent only a small part of the business – contributing only 6.4% and 8.5% of group revenue respectively – they are exciting growth prospects with huge potential. For Australian income investors, it's hard to go past Telstra for yield, safety and quality.

Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies. 

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »