Is Telstra Corporation Ltd your best bet for dividends?

Credit: Telstra

Shares in Telstra Corporation Ltd (ASX: TLS) are rallying higher this week after the group held its Investor Day on Monday.

Monday’s presentation reinforced to the market not only where the growth opportunities lie for the group, but it also coincided with the telecommunication giant announcing a significant capital management program which could potentially include the payment of special dividends.

Here are three key takeaways from Telstra’s Investor Day.

  1. Telstra is focussed on building the Telstra brand in Asia. This objective was partially achieved via strengthening its capabilities through the Pacnet acquisition. Pacnet added 29 data centres and the largest privately owned intra-Asia cable network leading to Telstra’s combined network now representing 30% of all intra-Asia submarine cable capacity.
  2. Focussed on expanding its presence in the health sector. Given the structural growth theme of healthcare, Telstra’s focus on this sector would appear to make sense. Telstra is looking to build out capabilities for providing solutions in primary, aged and residential care, hospitals, radiology, pharmacy, health analytics and telemedicine.
  3. Distributions to shareholders are set for a boost. With the recent sale of Autohome shares, Telstra will receive a windfall of cash proceeds. Management has announced that it expects to implement a capital management program of at least $1.5 billion commencing in the first half of the 2017 financial year.

With Telstra’s dividend viewed as maintainable by most investors, the stock’s current fully franked yield of 5.5% appears reliable and particularly attractive considering the maintainability of dividends from bank shares is now under a cloud of uncertainty. Adding in future capital management initiatives and the total income that Telstra’s shareholders are set to receive could be even more enticing for income-seeking investors.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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