The telecommunications industry is booming and at the top of the food chain is Telstra Corporation Ltd (ASX: TLS). It has its fingers in many different pies and profits nearly every time an Australian customer makes a phone call, sends an SMS or emails.
Investors have realised this and its shares have risen some 77% not including dividends in the past three years alone, compared to a return of just 18% from the S&P/ASX 200 (ASX: XJO) (^AXJO). However, I believe the good times can continue.
It might not be at the same rate as the past three years but there are plenty of reasons why it could trend higher in the short, medium and long terms. Here are my three favourite reasons why you should consider adding Telstra to your portfolio.
1. Asia presents itself as a major region in which the telco can leverage its local success to grow earnings. Although companies such as Singapore Telecommunications Group (ASX: SGT) already exist throughout much of Asia, Telstra has proven, through joint venture partnerships with existing telecommunications companies, that it has a lot to offer the market.
2. Telstra’s dividends are likely to grow in the near future. Analysts believe the telco’s dividend will be bumped up to 29 cents per share in the next year as its management figure out how they’ll deal with a forecast $7 billion in cash flow.
3. Dominating the local market has enabled Telstra to make a number of significant investments in new and emerging technologies such as network applications, cloud computing and unified communications. In the most recent half year, Telstra’s Network Application Services division (which includes these services) grew revenue by nearly 30%. I expect this to continue in the near term.
An even better dividend than Telstra
Telstra continues to push to new highs yet remains a worthy addition to long-term investors’ portfolios. With a focus on overseas earnings, local growth prospects and a juicy fully franked dividend it’s easy to see why investors want to own it.