Jun 09 2009
Telstra
*Discloses a regretted Telstra 2 purchase that is still currently held.
I have done some financial research on Telstra and decided the following.
Telstra is probably one of less lucrative investments you could currently make. Whilst they do provide a decent dividend each year I think this severely hampers this companies ability to grow and pay off a pretty large debt.
If Telstra decided to pay off all their debts from using all profit each year it would take approximately 4 years. However under their current dividend payment policy this could run up to 22 years (most home loans don’t last this long). Whilst not risky perse, if this were your company, would you not rather pay the house off as fast as you can? Or would you rather pay a pittance to the millions and millions of shareholders?
The company should keep its earnings and pay off debt. Once the debt is gone they should focus on finding other businesses that generator the very good returns on equity that Telstra do make and invest yearly profits into them.
What will happen in ten years?
As it stands (and if not much changes) on an equity growth basis I can see the share price going as high as $8.23 while on a profit growth basis this may be as low as $5.92. Compare that to the current share price of $3.24 and it does not look that flash a growth rate. Again, yes I know you get an 8% dividend yield at the moment but I doubt this can be maintained at current debt levels without further investment in growth opportunities ie. More debt or less dividend.
I think I might cool my heels on a further investment in Telstra and wait for another opportunity to come along. If it drops to $1.50 tomorrow I may reconsider.
Telstra are terrible customer service so I wouldn’t like to have shares just on that basis. No idea on the dollars
after your tipping on the weekend it will probably double in price tomorrow. Maybe i should get on, on that basis alone.
Telstra are up 5cents today. Well done Nostradamus, any other predictions?
Don’t Telstra own the national phone grid thingy. I would have thought this makes them a fair bit of cash. I agree with Jethro but their service is pretty bad. My Nan was on hold trying to sort out her new phone line for about three hours the other week just stupid.