Telstra Group Ltd (ASX: TLS) is generating significant interest following its impressive FY24 results released on Thursday. At the close of the market yesterday, Telstra's share price was up by 2%, reaching $3.95.
The company's FY24 financial performance revealed several standout aspects, particularly notable growth in its mobile business and an increase in its dividend payout.
Here’s a closer look at why Telstra’s shares are attracting attention:
- Earnings Growth and Dividends
Telstra's financial results exceeded many expectations, with the company achieving a 1% increase in total income to $23.5 billion. This growth was driven by gains across its various operating segments, leading to a 7.5% rise in underlying net profit after tax (NPAT), which reached $2.3 billion. As a result of this strong performance, management has revised its guidance higher, now expecting pre-tax income between $8.5 billion and $8.7 billion, slightly above consensus estimates.
A highlight of the results was the performance of Telstra's Mobile segment. The segment's earnings before interest, tax, depreciation, and amortisation (EBITDA) grew by 9.2%, surpassing $5 billion. This growth was fueled by increased revenue from higher-margin services and the addition of over 560,000 new mobile customers.
With mobile usage on the rise and services becoming integral to daily life, Telstra's competitive position is strengthened. For instance, forecasts suggest that the number of smartphone users will grow by approximately 3.7 million over the next two years, reaching 23.6 million by 2026, up from 20 million in 2017. Additionally, Telstra plans to expand its 5G network to cover 95% of the population next year, further enhancing its market position.
In response to its robust performance, Telstra's board approved a 5.9% increase in the full-year dividend, raising it to a fully franked 18 cents per share. This decision reflects the company’s confidence in its financial stability and its commitment to delivering value to shareholders.
- Positive Analyst Sentiment
Following the release of Telstra’s results, analysts have shown strong optimism regarding the company's performance. Observations highlight that Telstra's net profit exceeded expectations, supported by a solid balance sheet and strong free cash flow. Analysts have set a target price of $4.30 for Telstra shares, reflecting a positive outlook.
The dividend payout has been notable, with Telstra distributing 128% of its earnings per share (EPS) as dividends and 95% of its free cash flow after capital expenditures and reinvestments. This high payout ratio underscores the company's commitment to shareholder returns.
Final Thoughts
Telstra shares are garnering attention after a strong FY24 earnings report. Currently trading at a price-to-earnings ratio (P/E) of 21.4 times its EPS, the stock is priced slightly higher than the broader market but remains in line with its historical multiple from August 2019. Given the company’s enhanced shareholder value and solid broker support, Telstra presents an intriguing opportunity for investors.
Despite a 6% decline in its share price over the past 12 months, Telstra’s recent results and strategic moves suggest a positive outlook as it enters FY25.