Telstra Group Ltd (ASX: TLS) shares have been in focus this week.
That's because the telco giant has released its new Connected Future 30 strategy.
But what do analysts think of the company's growth plans? Let's find out.
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What are analysts saying about Connected Future 30?
The team at Macquarie Group Ltd (ASX: MQG) responded very positively to the strategy update and picked out a number of key points. It said:
Underlying ROIC expansion to 10% by FY30, driven by operating leverage. MSD cash EPS CAGR to FY30, with multiple cost-out options. Scope for further capital mgmt. Improving EPS profile and strong cash generation drives scope for growing dividend and/or buybacks. Network as a Product (NaaP) supports sales growth. Improving value proposition supports ARPU increases through mix, price & new revenue.
In light of the above, the broker has upgraded Telstra's shares to an outperform rating with an improved price target of $5.28 (from $4.75). This implies potential upside of almost 12% for investors over the next 12 months.
It has also bumped its dividend estimate for FY 2025 from 19 cents per share to 19.95 cents per share. This represents a 4.2% fully franked dividend yield at current prices.
A dividend of 22 cents per share is then expected in FY 2026, with a 23 cents per share dividend to follow the year after. Macquarie concludes:
Multiple cost-out levers & an ability to sustain mobile ARPUs. Despite execution risks from software-defined networking, ROIC growth and focus on the core competitive advantage in network and connectivity signals operating leverage and momentum. Upgrade to Outperform.
What else is being said about Telstra and its shares?
Over at Goldman Sachs, its analysts were very pleased with the update. They picked out two key points:
(1) Telstra has a clear focus on delivering consistent and predictable earnings growth, through simplifying the business, monetizing its core value proposition of superior connectivity, and maintaining tight cost discipline through a commitment to positive operate leverage.
(2) Telstra will look to maximize return to shareholders, with > A$20bn financial capacity through to FY30, which we estimate can fund 1¢ p.a. of annual dividend growth and A$7-8bn of buybacks/special dividends – which could be potentially supplemented by further asset sales.
In response, the broker has retained its buy rating and $4.90 price target on its shares.
Unlike Macquarie, no changes have been made to its dividend forecasts. It continues to expect dividends per share of 19 cents in FY 2025, 20 cents in FY 2026, and then 21 cents in FY 2027.
Goldman concludes:
Overall, we are very positive on this strategy for Telstra, seeing it as relatively lower-risk growth which if successfully executed, can drive attractive and sustainable shareholder returns.
