Telstra Corporation Ltd (ASX: TLS) is the latest S&P/ASX 200 Index (ASX: XJO) company to announce its full-year earnings for FY2020, which were divulged this morning. Evidently, the market didn't really like what it saw, given that the Telstra share price is down around 5.6% at the time of writing to $3.20.
I can see why investors are a little sceptical of our largest ASX telco today. Telstra reported earnings within its guidance range. But the $7.4 billion of earnings before interest, depreciation, tax and amortisation (EBITDA) was 9.7% lower than FY2019's earnings. As a Telstra shareholder myself, I'm not too worried though. The coronavirus pandemic was always going to have something of an impact on Telstra's numbers, which ended up impacting around $200 million in earnings. And the NBN is still draining money away from the telco.
But there was one bright spot for me as a shareholder. It was the announcement that Telstra will be continuing to pay a dividend worth 8 cents per share.
In a year where former dividend heavyweights like the ASX banks, Transurban Group (ASX: TCL) and Sydney Airport Holdings Pty Ltd (ASX: SYD) have been deferring, slashing or cancelling their dividend payments, Telstra is a pillar of strength in my view. With the Telstra share price of $3.20, the 8 cents per share dividend equates to an annualised dividend yield of 5%. Including Telstra's full franking credits, this yield grosses-up to 7.14%.
You could do a lot worse in this era of record-low interest rates!
What about Telstra shares and 5G?
But dividend income alone isn't all I see in the future of Telstra shares. The company is also heavily investing in the next generation of mobile technology: 5G.
5G promises to overhaul the way we use the internet. Its potential applications range from NBN-beating speeds with low latency to the Internet of Things (IoT). In its earnings report this morning, Telstra told investors that it expects its 5G coverage "will reach around 75% of the Australian population by June 2021". I'm confident Telstra's market dominance will be extended into the 5G realm due to the company's first-mover advantage. It is already well ahead of its competition (including the newly merged TPG Telecom Ltd (ASX: TPG)) in its 5G investments and rollout. This could lead to a new and lucrative stream of revenue for Telstra very soon.
Foolish takeaway
All in all, I think Telstra shares represent a great investment today, despite the company's patchy earnings report. In my eyes, you are getting a dividend heavyweight offering a sustainable 7.14% grossed-up yield, with a potentially lucrative 5G growth avenue right in front of it. Not a bad offering in these uncertain times, I reckon!
