The Telstra Group Ltd (ASX: TLS) share price looks like an effective long-term ASX 200 (ASX: XJO) investment because of the prospect of rising earnings and dividends.
As the largest telco in Australia, the business has an enviable market position with what’s seen as a very strong network for users, including a leading regional network.
Now I’m going to run through my favourite three reasons to like the company.
Revenue growth
I think one of the most important things for a business to do well is revenue growth, as that’s an organic boost for profit.
Before COVID-19, the telco sector was a competitive industry and it had to compete hard to maintain market share. But now, after a series of mergers and acquisitions within the industry, Telstra seems like the dominant player and it seemingly feels it can increase its prices at the rate of CPI inflation.
Telstra is increasing its revenue per user and it continues to benefit from a growing number of users as well. Plus, international tourists and visitors have returned, which is another boost for revenue thanks to roaming.
Rising profit
What’s even more important than rising revenue is growing profit. The profit is often what investors value the business against and profit is what pays for the dividends.
Telstra has been steadily cutting its costs, as well as executing various initiatives with the T22 and T25 strategies. The telco ASX share is expecting double-digit earnings growth over the next couple of financial years, which is a useful tailwind for shareholder returns.
The telco can keep growing profit pleasingly if it’s successful at increasing its revenue and improving its profit margins.
Growing dividends
Telstra is known for paying attractive dividends, and it looks like the ASX 200 share is going to keep doing that for the foreseeable future.
The company has started growing its dividend again thanks to the profit growth I’ve already mentioned. Telstra is now paying an annualised dividend of $0.17 per share. I think the company will advance its dividend to $0.18 per share and $0.19 per share in the coming years. At $0.17 per share, that’s a fully franked dividend yield of 4%.
