What to expect from the Telstra Corporation Ltd (ASX:TLS) Investor Day

One of the biggest corporate events this year will be the highly anticipated Telstra Corporation Ltd (ASX: TLS) Investor Day on June 20.

This Investor Day event is being seen by many as a pivotal day for the telco giant where it is expected to discuss its growth initiatives and address the earnings gap that it faces. One broker has even tipped the company to announce a dividend cut at the event.

And with the meeting just one week away, analysts at Goldman Sachs have outlined five key points to focus on at the meeting.

The first is the business case and potential financial impact of 5G internet. According to the note, Goldman expects Telstra to discuss the impact that the arrival of 5G internet in FY 2020 will have on its struggling mobile segment. The mobile business is expected to see EBITDA decline in FY 2018 and FY 2019, but could return to growth in FY 2020 if 5G leads to improvements in mobile margins and average revenue per user (ARPU).

The second is for Telstra to provide greater disclosure on the composition of its mobile ARPU, especially after postpaid ARPU deteriorated recently despite minimum monthly commitments (MMC) increasing. Goldman estimates that Telstra’s postpaid ARPU (ex MRO) of $65.35 is made up of: $59.30 MMC, $2.00 in excess data, $3.20 in international roaming, and $0.80 in other services.

The third thing to look out for is its cost reductions. Goldman estimates that Telstra is on course to exceed its $1.5 billion target for underlying fixed cost reduction. But it doesn’t believe the company will stop there and expects increased productivity targets will be announced. It does, however, want the telco giant to provide more colour on where these reductions are coming from and where the incremental cost opportunity has come from. It also suspects further redundancies could be announced.

Fourth on the list of things to look out for is “aspirational” financial targets. While the company has given some longer term financial estimates to the market, it feels Telstra could provide aspirational financial targets (not guidance) across key product lines for the next three to five years.

And finally, the broker expects management to provide some clarity on its dividend. Although Goldman currently forecasts Telstra to maintain its 22 cents per share dividend over the next few years, it would require a reasonably high payout ratio. As a result, it concedes that a dividend cut for FY 2019 cannot be ruled out.

Should you invest?

Goldman Sachs has Telstra on its conviction buy list with a $3.90 price target. Although I agree with the broker and think that Telstra looks to be good value at this level compared to industry peers TPG Telecom Ltd (ASX: TPM) and Vocus Group Ltd (ASX: VOC), I wouldn’t invest until everything has been revealed at its Investor Day event.

While I suspect a potential dividend cut has already been priced into its shares, if a cut is more severe than expected then it could send the Telstra share price even lower. As such, I think the prudent thing to do is to keep your powder dry until the meeting.

So for now I would suggest investors looking for dividends consider this top share which has been increasing its dividend significantly this year.

OUR #1 dividend pick for June 2018 is revealed for FREE here!

Financial year 2018 is here and The Motley Fool’s dividend detective Andrew Page has revealed his must buy dividend share to grow your wealth in 2018.

You might not know this market leader's name, but it's rapidly expanding into a highly profitable niche market here in Australia. Even better, the shares boast a strong, fully franked dividend that should balloon in the years to come. In other words, we're looking at the holy grail of incredible long-term growth potential AND income you can watch accruing in your account in real time!

Simply click here to grab your FREE copy of this up-to-the-minute research report on our #1 dividend share recommendation now.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited, TPG Telecom Limited, and Vocus Communications Limited. 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 Scott Phillips.

5 ASX Stocks for Building Wealth After 50

I just read that Warren Buffett, the world’s best investor, made over 99% of his massive fortune after his 50th birthday.

It just goes to show you… it’s never too late to start securing your financial future.

And Motley Fool Chief Investment Advisor Scott Phillips just released a brand-new report that reveals five of our favourite ASX stocks for building wealth after 50.

– Each company boasts strong growth prospects over the next 3 to 5 years…

– Most importantly each pays a generous dividend, fully franked.

Simply click here to find out how you can claim your FREE copy of “5 ASX Stocks for Building Wealth After 50.”

See the stocks now