Telstra Corporation (ASX: TLS) is an income investors best friend. It has proven it can provide market beating returns and still pay an above average distribution to its faithful shareholders. But that's not all. Here's 4 reasons why Telstra could fit into almost any portfolio.
1. Brand Recognition
In the stock market, many investors underestimate the power of brand names. As can be witnessed from the mass-exodus of customers from Vodafone – part-owned by Hutchison Telecommunications Australia (ASX: HTA) – since 2011, having a reputation for reliable products and services can be the difference between losing or gaining 30% of your initial investment.
2. Cash Flow
Telstra's enormous cash flow affords investors another degree of safety. Compared to its blue-chip peers such as Woolworths (ASX: WOW) and Westpac Banking Corporation (ASX: WBC), Telstra is superior in terms of its ability to invest in high margin businesses.
3. Dividends
Thanks to its margins, dominance and huge pile of cash, investors are rewarded with consistently high dividend yields. However, with asset sales ongoing and NBN payments set to reward the telco in the long-term, dividends can be expected to increase. Its forecast 2014 dividend yield is 5.7%, ahead of both Commonwealth Bank (ASX: CBA) and Wesfarmers' (ASX: WES) payouts.
4. Growth
With individuals and businesses relying more and more upon internet enabled devices and other computer networks, revenues from Telstra's International and Network Application Services (NAS) division is set to increase significantly. In the first half of FY14, both businesses notched up revenue growth of nearly 30%.
5. Safety
When you combine all the above characteristics to any investment, it could present itself as a safe way to invest your money. That doesn't mean Telstra shares won't drop in price (because they will eventually) but you can be assured they'll last through even the worst market cycle and come out a leaner and more efficient company.
Just when you thought it couldn't get any better…
