Chart: The 5 ways Telstra Corporation Ltd makes money

Source: Telstra presentation

Telstra Corporation Ltd (ASX: TLS) is one of Australia’s biggest and most widely-held shares, and it’s not difficult to see why.

Not only is it the dominant force in Australia’s telecommunications sector, it also enjoys strong customer loyalty and strong cash flows from operations. Another factor that makes it so popular among mum-and-dad investors is, of course, its lucrative fully franked dividend, with its shares currently trading on a yield of 5.4% (grossed to 7.7%).

In one simple chart, here is how the company generates its revenue:

Source: Telstra; S&P Global Market Intelligence

Source: Telstra; S&P Global Market Intelligence

It should be noted that Telstra has altered its segments between financial year 2010 and financial year 2015, so I have made adjustments as I saw fit.

It can be seen that Telstra generates the vast majority of its income from its core Telstra Retail division, which is responsible for the support of both consumer and small to medium-sized enterprise customers in Australia. This is increasingly coming from mobile products and the supply of data.

Telstra also generates a considerable portion of its revenue from global enterprise and services, which is responsible for, amongst other things, the support for government customers as well as management of Telstra’s networks outside of Australia.

Although Telstra has had its fair share of issues lately — most of which relate to the quality of its network — the telco should manage to resolve those issues over time. Moreover, its strong cash generation should allow it to continue paying out significant dividends to investors over the coming years, making it a staple stock for many long-term investors and retirees.

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Motley Fool contributor Ryan Newman 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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