Why I love you Telstra

Telstra dials up the dividend

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Offshore markets have taken a breather overnight, with the US Dow Jones sliding 0.2%, and the S&P 500 closing flat. 聽Following five consecutive days of gains, the ASX has turned south, despite strong results from a number of big blue chips.

Doing the damage is our unemployment rate jumping to 6%, its highest level in more than a decade. 聽Not surprisingly, the Aussie dollar is on the nose, plunging back below 90 US cents. 聽How it even snuck back up that high in the first place has got me dumb-founded. I’m with the International Monetary Fund (IMF) who reckon the Australian dollar is too high and needs to come down by as much as 10%.

What all this does is put Westpac’s Bill Evans’ forecast of two interest rate cuts later this year, taking the official cash rate to 2%, firmly back on the table. 聽Yes Foolish readers, the era of ultra-low interest rates is here to stay… all of which means聽stocks paying fully franked dividends聽will likely remain as popular as ever.

Telstra dials up the dividend

Telstra Corporation(ASX: TLS) shares were up 1% this morning, after delighting the SMSF Army with news it has increased its fully franked dividend, from 14 cents to 14.5 cents. 聽It’s the first dividend increase in eight years, but shows how the company’s future is improving.

On top of that, profit has risen 9.2%, despite revenues growing only 3.5%. The gorilla’s dominance of the mobile market continues, with another 740,000 retail mobile customers added, taking the total to an amazing 15.8 million. 聽What was surprising was Telstra’s decision to fax its results through to the ASX. 聽And here I was thinking the fax had gone the way of the dodo.

Optus, Australia’s second largest mobile operator, also hasn’t done too badly either reporting a 41% increase in net profits. 聽Vodafone – you are today’s loser.

The bit-con

Those lovely dividends are better than a poke in the eye with a blunt stick, term deposits, bonds and bitcoins, dear readers.

It seems three major bitcoin exchanges have frozen customer withdrawals due to a ‘technical glitch’. The cyber currency is currently valued at US$630, having fallen from US$1,100 in November 2013. 聽David Bailey, who sells physical bitcoins,聽says聽he was ‘a bit unnerved’ when two of his transactions ‘simply disappeared’. 聽“If I was fresh to Bitcoin, I would have been very scared.” 聽Avoiding the cyber currency is a virtual no brainer if you want to sleep well at night.

But we better not forget about the gold bugs

What is perhaps a better investment than bitcoins is gold — although some here at the Motley Fool would say there was no difference!

The yellow metal has defied predictions of a fall to US$1,000 or below. (That’s what happens when analysts extrapolate short term movements into long term forecasts). 聽Gold has hit a three month high, rising to US$1,290 an ounce overnight. 聽And Wells Fargo’s head of trading strategy Rick Bensignor is bullish聽saying…聽“Gold can probably rise to between US$1,350 and US$1,375 in the next several weeks.”

I did suggest that gold could soar this year in this聽article, thanks to a recovering US economy and potentially higher inflation.聽I may have got the reason wrong though.

China’s love affair with gold

It seems China’s love for the metal knows no bounds, with trading volume on the Shanghai Gold Exchange聽on Monday聽totalling 25,725kg, the highest level since May 2013. 聽China ‘consumed ‘1176 tonnes of gold in 2013, 41% higher than the previous year, with 717 tonnes of it going into jewellery, 376 tonnes of gold bar investment, 49 tonnes in industrial use and the remainder in gold coins and the like.

Some commentators have suggested that China may be worried about its foreign currency reserves being heavily weighted to US securities and US dollars, and is upping its gold purchases to diversify. 聽Whatever the reason, a rising gold price and a lower Aussie dollar are great news for Australian gold miners.

Off his rocker? Maybe not

Back in early December, we thought聽Motley Fool Share Advisor聽stock picker Scott Phillips was off his rocker when he said he was starting to take a look at gold stocks. 聽Of his five preferred,聽Silver Lake Resources(ASX: SLR) is up 83%,聽Northern Star Resources(ASX: NST) up 62%,聽Kingsgate Consolidated(ASX: KCN) up 46%, and聽Beadell Resources(ASX: BDR) and聽Kingsrose Mining(ASX: KRM) are up 13% and 5% respectively. 聽The S&P/ASX 200 index is up just 2.2% since then.

Is this the lowest cost gold producer in Australia?

Another gold miner that could have a massive future and is flying under the radar is聽Doray Minerals(ASX: DRM). 聽According to broker聽reports, Doray’s Andy Well mine is one of the highest grade gold projects in Australia. With all in sustaining production costs of $949 an ounce, it could be THE聽lowest cost mine聽in the country.

Doray produced 24,000 ounces in the last quarter, which at the current exchange rate of US 90 cents has them generating earnings of $480 per ounce. 聽In other words, around $46 million earnings per year — for a company with a market cap of just $129 million.聽As a result, Doray is paying back debt rapidly, and well known stock picker聽David Paradice‘s Paradice Investment Management has recently increased its holding in the company to 6.6%.

Doray has recently gone into a trading halt to raise capital, but once completed, gold bugs might want to add the company to their watchlist.

Mike King holds positions in Telstra, Silver Lake Resources, Kingsrose Mining, Beadell Resources.

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