Looking for a quality, dividend-paying S&P/ASX 200 Index (ASX: XJO) stock that's tipped for significant upside?
Then you may want to look into TPG Telecom Ltd (ASX: TPG).
That's according to Marcus Ryan, deputy portfolio manager of Yarra Capital's Australian Equities Fund (courtesy of The Australian Financial Review).
"We've tilted away from the highly overvalued pockets of the ASX where passive investment has had a disproportionate impact, like the banks," Ryan said. "The sector represents a quarter of the ASX and is trading on staggering 20-times earnings which is more than 50% above long-run valuations."
Indeed, with the Commonwealth Bank of Australia (ASX: CBA) share price up more than 39% this past year, Australia's biggest bank stock trades on a price-to-earnings (P/E) ratio of just over 30 times.
Which brings us back to TPG, which Ryan named as the ASX 200 stock his fund holds that he believes has the most near-term upside.
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Should I buy this dividend-paying ASX 200 stock today?
"We are excited by TPG, Australia's third-largest telecommunications company," Ryan said (quoted by the AFR).
"It's trading around $5.40 today, but we see attractive upside as TPG emerges as more of a pure play mobile operator," he added, citing the first reason the ASX 200 stock is a buy.
"This is the best part of the telco industry where there is clear growth. Prices are rising as all three market participants focus on improving earnings from depressed levels," he added.
Then there's the telco's sale of its fibre network infrastructure assets to Vocus Group Limited. That divestment was approved by the Foreign Investment Review Board (FIRB) on Monday.
According to Ryan:
TPG's recent divestment of the Vocus fibre network assets will deliver around $4.7 billion of net proceeds in the December half, strengthening the balance sheet and leaving strong capacity to return shareholder capital.
Which brings us to the third reason this dividend-paying ASX 200 stock could deliver some outsized gains in the months ahead.
Ryan noted:
TPG is emerging [as] a more simplified business with sustainable leverage and a stronger growth profile, which boosts market appeal for a broader cohort of investors. This offers scope for improved analyst ratings, the majority of which have a 'sell' recommendation, largely for legacy reasons.
What's been happening with TPG shares?
The TPG share price closed up 1.30% on Wednesday, with shares trading for $5.45 apiece.
That sees shares in the ASX 200 stock up an index-smashing 21.38% so far in 2025.
As for those dividends, TPG shares currently trade on a partly franked trailing dividend yield of 3.3%.
