Telstra Group Ltd (ASX: TLS) has faced some turbulence recently, with its shares declining nearly 4% since reaching a multi-month peak on August 1. Despite this recent downturn, there are indications that Telstra might be an attractive option for those looking at long-term investment opportunities, especially with the company's financial results for FY24 on the horizon.
Current Performance and Expectations
Telstra's recent performance reflects the broader market trends, with its stock experiencing fluctuations. However, with the company set to release its FY24 results later this month, there is optimism about its financial outlook. Analysts expect Telstra, an ASX communication stock, to deliver results within its previously stated guidance ranges, driven by growth in its Mobile and InfraCo segments.
Looking ahead, there is anticipation that Telstra might adjust its guidance for FY25. The expectation is that the company's EBITDA guidance range could be revised to A$8.5-8.7 billion, up from the previous range of A$8.4-8.7 billion. This adjustment would reflect increased confidence in Australian mobile pricing and typically aligns with Telstra’s year-ahead guidance patterns.
Dividend Potential
For investors interested in income, Telstra's dividend yields are noteworthy. The company is forecasted to provide fully franked dividends of 18 cents per share for FY24 and 19 cents per share for FY25. These dividends represent yields of 4.7% and 5%, respectively, which could appeal to those seeking reliable income streams.
Positive Outlook
Telstra is viewed positively due to its stable earnings and potential for value creation through non-core asset sales. The company’s mobile business is expected to continue delivering steady earnings and dividend growth. There is also potential for significant value extraction from Telstra’s InfraCo Fixed assets, which are estimated to be worth between A$22-33 billion. Additionally, the opportunity to monetize its recurring NBN payment stream, valued between A$14.5-17.9 billion, is seen as a strategic move with minimal loss of strategic benefit.
Risks to Consider
Despite the positive outlook, there are several risks to be aware of. Increased competition from rivals such as Optus and TPG, as well as potential challenges from smaller players leveraging the NBN, could impact Telstra’s earnings and dividend growth. There is also the risk of disappointing cost reduction performance, unfavorable regulatory changes, and delays in infrastructure monetization or lower-than-expected realized value.
Telstra Group Ltd (ASX: TLS) presents an intriguing prospect for investors, particularly in light of its upcoming FY24 results and the potential for dividend income. While there are risks to consider, the company's stable earnings, growth prospects, and strategic opportunities make it a noteworthy candidate for those seeking long-term investment options.