AUS
NZ
UK
CA
USA
IND
TPG Telecom Ltd (ASX: TPG) shares have faced a decline of 40% from July 2020 and a further 22% drop from August 2022, prompting investors to assess the underlying factors influencing this ASX communication share.
Key Highlights:
Growing Dividend:
- TPG has demonstrated consistent growth in its annual dividend since 2021, offering shareholders a growing income stream.
- The past 12 months have seen dividends totaling 18 cents per share, translating to a grossed-up dividend yield of approximately 5%.
- Commsec suggests that TPG's annual dividend per share in 2024 could reach 18.8 cents, with further growth to 20 cents per share in FY25 and 21.4 cents per share in FY26.
Price Increases and Subscriber Growth:
- Vodafone's recent price hikes, though applicable to new customers, may contribute to increased revenue.
- Postpaid Average Revenue Per User (ARPU) rose to $44.6 in the first half of FY23, reflecting a 6.2% year-over-year increase.
- Subscriber numbers continue to climb, with postpaid subscribers reaching 3.23 million, marking a 2.2% YoY increase.
- Total prepaid subscribers rose by 167,000 YoY to 2.07 million.
Profitability and Investment for Growth:
- TPG's fixed costs remain steady, and revenue growth can enhance underlying profitability.
- The company's capital expenditure and investment in 5G technology aim to unlock additional earnings and compete effectively in the broadband market.
- TPG's focus on the 5G network enables the provision of 5G-powered wireless home broadband, potentially increasing margins.
Valuation and Outlook:
- While TPG shows promise, it's not exhibiting explosive growth. The emphasis is on being a solid dividend share, although the valuation is considered relatively high.
- According to Commsec, the TPG share price is valued at 31 times FY24's estimated earnings and 27 times FY25's estimated earnings.
Conclusion:
TPG Telecom's strategic focus on dividends, price adjustments, subscriber growth, and investment in 5G positions it as a potential ASX dividend share. However, investors should carefully consider the valuation and weigh the potential returns against the current share price.
