Telstra Corporation Ltd (ASX: TLS) is a rock-solid stock with huge investor support. A once government-run asset, Telstra is now one of the best companies in Australia. Its dominance in the local market stems from its natural monopoly on heavy infrastructure assets such as its 100-year-old copper cable.
But it's not over yet.
Although investors have recently become concerned over the government's review of the NBN rollout and in particular Telstra's responsibility to it, it's unlikely to leave shareholders in a worse position than they are now.
In fact, right now there are more reasons to buy Telstra than to sell it. Here are three BIG reasons why you should consider buying shares in our number-one telecommunications company today.
1. More than a telco
In recent years Telstra has been able to throw its weight around, buying up different assets and selling others. Some of the assets outside what investors typically associate with Telstra are now proving to be extremely lucrative investments, such as those found in the group's International division. For example, Telstra has a majority ownership in China's version of Carsales.com.au called Autohome (NYSE: ATHM). The recent listing of the business on the New York Stock Exchange and ongoing demand for its services helped the division to 28% revenue growth in the first-half of 2014.
2. Local Dominance
Telstra continues to command the lion's share in many of the markets it competes in. From mobiles to pay-TV operator Foxtel and everything in between, Telstra enjoys huge margins on services which continue to be in demand. Despite subscriber growth in mobiles slowing, usage rates are flying higher and so too is our reliance upon networked devices. This has enabled the company's Network Application Services (NAS) division to grow revenues by 29% in the most recent half-year.
3. Dividends
While interest rates are low, investors have flocked to big name stocks like Telstra and the banks for a reliable stream of fully franked dividends. The good news for long-time shareholders is that the payout will likely increase in coming years as free cash flow continues to grow. Recently we saw the first increase to its payout in eight years when, on the back of a strong operating performance and divestments, the company announced a 14.5 cent interim dividend. Based on a full year payout of 29 cents, Telstra shares currently trade on a dividend yield of 5.7%.
Foolish takeaway
Despite rising competition for fixed internet customers and slowing mobile subscriber growth, Telstra has plenty to offer investors. Its booming International and NAS divisions, combined with the biggest and most reliable mobile network in Australia will enable it to continue paying out a juicy fully franked dividend to fuel investor demand. Now could be the opportune time to add it to your portfolio.
