This article is about why I think the Telstra Group Ltd
(ASX: TLS) share price makes it a leading ASX blue chip share to buy.
When some investors invest, they may be looking to achieve the most growth.
However, other people may be looking for the most stability.
There are no guarantees for the share market. While a company’s earnings may be resilient, the Telstra share price can still go up and down along with the rest of the market.
But, stable earnings could help investors see the defensive side of the business.
Essential utility
Food and drink are obviously two of the most essential things for a household.
But, after that, I’d put the telecommunications bill right up there as an essential bill for households to pay.
We may use it for work, education and accessing entertainment. Connecting with family and friends is another key use. And so on.
It’s also a low cost. Owning a car is expensive, whereas it doesn’t cost much to pay for the monthly Telstra bill.
This gives Telstra very useful annual cashflow, even in a downturn. I think the COVID-19 lockdowns were a great example of how Telstra can keep earning even in a difficult situation.
Earnings and dividend growth
I like the number of strategies that Telstra is using to try to grow profit.
It had announced it’s going to increase prices at the same pace of CPI inflation. This will give earnings a natural boost as long as costs don’t go up by as much.
Telstra is actually working on reducing some of its costs as one part of the T25 strategy.
If it’s able to reduce costs by many millions of dollars then it should be able to increase its profit margins and therefore grow its net profit. This should be supportive for the Telstra share price.
This will also enable the business to increase the dividend.
Investors love that Telstra keeps paying a good dividend to shareholders. It means the business is achieving real returns for investors every year.
If Telstra can increase its annual dividend per share to $0.17 in FY23 and then $0.18 in FY24, this would represent a good yield and solid growth.
Final thoughts on the Telstra share price
I’d much rather invest in Telstra than the banks these days. After the strong run of commodity prices, I think Telstra looks better priced than the miners as well. Only Wesfarmers Ltd (ASX: WES) could make a better long-term pick of the biggest ASX companies, in my opinion.
