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Telstra's dividends to meet forecasts

Nicholas Grove  |  29 Jan 2013Text size  Decrease  Increase  |  

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Nicholas Grove is a Morningstar journalist.

 

With Australia's biggest telco slated to release its half-year earnings on 7 February, it's fair to say a lot of investors' eyes will be on whether or not Telstra's (TLS) dividend will be in keeping with the expected full-year forecast.

Morningstar consumer, tech and telecom analyst Michael Wu is expecting the half-year dividend to be consistent with the forecast full-year dividend payment of 28 cents a share.

"We do expect first-half dividends to be 14 cents a share. That is in line with the guidance given by management," Wu says.

"But we do expect growth (in dividends) for the year after, in fiscal 2014. We're forecasting 31 cents," he says.

Analysts at UBS are also expecting a 14-cent fully franked dividend from Telstra for the first half, as well as 14.5 per cent growth in net profit after tax to $1.68 billion.

They expect this to be driven by underlying revenue growth of 2.6 per cent, a 110-basis-point expansion in EBITDA (earnings before interest, tax, depreciation and amortisation) margin, coupled with lower depreciation and amortisation.

The 110-basis-point margin expansion will primarily be driven by a 150-basis-point and 300-basis-point expansion in margins from the mobile and broadband divisions, respectively, the analysts say in a recent note.

This will be partially offset by a $130-million impairment charge relating to the recent sale of the TelstraClear unit to Vodafone New Zealand, they say.

When it comes to the key drivers of Telstra's first-half earnings, Morningstar's Wu also expects to see solid performances from both mobile and broadband.

"I think the result will be similar to last year, so it will be driven by mobile," Wu says.

Wu explains there will be a couple of factors driving growth in ARPU - or average revenue per user - in the mobile division.

"One is that the discount from all the contracts that Telstra implemented two years ago ... they sort of roll off. If their customers decide to roll onto new contracts, I think that could provide ARPU uplift," he says.

"The other thing is that they lifted their prices in July last year. So, we should be able to see some of that impact flowing through in these first-half numbers."

Wu also says that in the mobile market, Telstra has been growing strongly against its rivals and managed to retake some market share last year.