Telstra Group Ltd (ASX: TLS) stock could be in a very different place in five years, based on its profit forecasts alone.
As the chart above shows, the past five years have been volatile for the ASX telco share. There may still be volatility between now and 2029, but I expect Telstra to be in a much better place as we approach the end of the decade.
In my view, companies that can grow profit are more likely to deliver positive shareholder returns.
Let's have a look at how the financials could change for Telstra stock by FY29.
FY29 forecasts
The ASX telco stock is now regularly growing its underlying profit after years of profit headwinds due to the shift to the NBN.
Broker UBS is projecting that Telstra's revenue and profit can grow every year until FY29.
Let's start with the projections for the current financial year, FY25. UBS predicts Telstra can generate $23.9 billion of revenue, $3.84 billion of operating profit (EBIT), and $2.15 billion of net profit after tax (NPAT) in the 2025 financial year.
In the 2029 financial year, the telco is predicted to generate $26.2 billion of revenue and $5.5 billion of EBIT. This could lead to the net profit rising to $3.24 billion.
UBS suggests that revenue could grow by 10%, EBIT could rise 44%, and NPAT could climb 50% between FY25 and FY29.
Many investors may also be focused on the potential passive income for Telstra stock owners. Telstra's dividends have been growing in recent years, and the next few years could see more growth. This is appealing as it adds to the potential shareholder returns.
UBS is forecasting Telstra could increase its annual dividend per share to 19 cents in FY25. That would be a fully franked dividend yield of 4.9% and a grossed-up dividend yield (including franking credits) of 7%.
Excitingly, by the 2029 financial year, the broker predicts that the Telstra dividend per share could be 27 cents, an increase of 42% compared to FY25. The FY29 forecast payout would translate into a fully franked dividend yield of 7% and a grossed-up dividend yield of 10%.
What I'm hoping to see from Telstra stock
In my view, Telstra is one of the most appealing ASX blue-chip shares, with both defensive and growing earnings. I'm hoping to see the business continue to grow its subscriber numbers at least at the same growth rate as the overall telco market.
I think one of the best profit levers that Telstra can pull is growing its number of wireless broadband customers. That's where the customer's home broadband is powered by Telstra's 4G and 5G rather than the NBN. This would allow Telstra to capture much more of the profit margin rather than handing it over to the NBN.
I'm also excited by the company's potential to benefit from the growing trend of internet-connected devices. Plus, its other businesses could contribute to earnings growth such as its international earnings and cybersecurity.
Overall, I think Telstra stock has a very positive outlook for the next five years.
