TLS - Telstra Corporation

[MrBurns]

Ex-div today and down about 2.5%, which is probably less of a fall than many were expecting, especially after such a big run up also

Is there any advantage buying in now ?

Seems to me you get the capital gain when it bounces back but you lose the dividend.

Dividend is tax paid , capital gain isn't..........

 

[skyQuake]

when it bounces back

is that guaranteed?

 

[MrBurns]

224M traded so far

 

[burglar]

... but you lose the dividend. ...

Where did you lose it?

 

[MrBurns]

Where did you lose it?

Why else would the stock reduce by approx value of the dividend ?
I'm probably not reading this right, enlighten me.

 

[Bintang]

Is there any advantage buying in now ?

Seems to me you get the capital gain when it bounces back but you lose the dividend.

Dividend is tax paid , capital gain isn't..........

My target for TLS has been $4.95 for a long time so for me personally TLS is getting close to full valuation based on its current full year dividend of 28cents. I believe the dividend can be maintained at 28 cents for some time yet but dividend growth still looks elusive.
Now that the hordes in general are chasing dividend yield TLS might push higher to around $5.00 from here but if it goes beyond that I will put it down to irrational exuberance unless some actual real evidence emerges that Telstra can start to grow its dividend.
If chasing dividend yield is your game the current TLS price doesn't offer much advantage over similarly good, 100% franked, dividend yielding stocks, such as the banks. At current prices I am holding but not acquiring. When I get my TLS dividends I normally use them to acquire more TLS but I will be ambivalent about this next March. Might be time to diversify.

 

[MrBurns]

They were down .14c initially and now they're back where they started almost.
In a day or 2, missed buying opportunity...... for me anyway.
Lesson for the future I guess.

 

[JTLP]

TLS is still yielding 6.1% - this is on par with NAB and higher than the other 3 banks.

Given the 28 cents looks pretty locked in for some time - and the nearest best yielding High Interest Saver getting about 5% for Mums & Pops - may not be too bad to hop in for the short term. If things were being based on yield alone - could run to $5.50 before equalling a saving account; however lets wait and see.

Thoughts?

 

[Bintang]

TLS is still yielding 6.1% - this is on par with NAB and higher than the other 3 banks.

Given the 28 cents looks pretty locked in for some time - and the nearest best yielding High Interest Saver getting about 5% for Mums & Pops - may not be too bad to hop in for the short term. If things were being based on yield alone - could run to $5.50 before equalling a saving account; however lets wait and see.

Thoughts?

JTLP I have a couple of thoughts for what they are worth:
1) Your Mums & Pops will pay tax at their marginal rate on any interest income so at a TLS share price of $5.50 a fully franked 5% dividend will still be better value than 5% savings account interest.
2) Nonetheless you need to consider the relative risks. In the share market your capital is at more risk than if it is in a bank account. So I personally would not buy TLS at a price which gave me an after tax yield which is merely as good as the after tax interest from a savings account. I would want something better than that from TLS to justify the risk of having my capital in the share market rather than in the bank account. So if you are just chasing yield that consideration should put a cap on the price you are prepared to pay. For me personally TLS has reached that very point at its current price of around $4.50 to $4.60. But risk judgement is subjective so there may well be investors who are prepared to buy TLS at prices that yield 5% or less in preference to putting their money in a savings deposit.

 

[brianwh]

TLS and a change of Govt.

Can anyone direct me to a credible analysis of the likely impact on TLS shares of a change in Govt. Given how widely held these are I would have thought it a topic fairly well covered. I have heard the issue addressed a couple of times on Your Money Your Call but the "experts" seemed fairly clueless

 

[Bintang]

Re: TLS and a change of Govt.

Can anyone direct me to a credible analysis of the likely impact on TLS shares of a change in Govt. Given how widely held these are I would have thought it a topic fairly well covered. I have heard the issue addressed a couple of times on Your Money Your Call but the "experts" seemed fairly clueless

I don't know about analysis but this article from the Financial Review is interesting:
http://www.afr.com/p/technology/telstra_keen_to_keep_its_darling_H8TPMnszDnY2hQvX7LUvKP

The article states that Malcolm Turnbull "...has indicated Telstra shareholders would be no worse off under his plan" whatever that means.

But some of the so-called "experts" don't like TLS shares irrespective of what is happening with NBN. I can't figure out whether they are 'super geniuses', 'merely smarter than me', 'fairly clueless' or 'completely clueless'.
For example this is Roger Montgomery on Your Money Your Call:
http://www.youtube.com/watch?v=Pn6a0pnEgFY

Here is some of what he says:
"...TLS has gone up because its popular. It hasn't gone up because it is good quality."
"...without a doubt they [Telstra] cannot afford that dividend [i.e 28 cents] from their cashflow from operations and with what they are doing"

"...they end up with free cash flow of about $600 million and their dividend was $1.7 billion ... so they can't afford their dividend. I reckon they are bleeding ... I think Telstra can't afford to do any of the things they would love to do because they have made a commitment to the market to pay this dividend and I don't think it is sustainable..."

"They are getting a big payment for retiring their copper network .... so from that cash they will pay the dividend but as an operating business, from free cash flow they can't pay that dividend. You've got to keep that in mind. To me it's not a high quality business. All the best analysts covering this stock ... and they're better than me at it... they're saying that in 2014 the profits of this company are still not going to be any higher than they were in 2002. That's 10 years or 12 years and no growth in earnings."

So this guy is implying that without NBN cash TLS cannot pay its dividend. I struggle to understand this statement because having taken the trouble to read Telstra's annual and half yearly reports I observe the following:
There are 12,443 million TLS shareholders
In 2012 financial year Telstra received $67 million of NBN cash which equates to 0.5 cents per share.
In first half 2013 financial year Telstra reports receiving $176 million of NBN cash.
In the full 2013 financial year Telstra is expected to receive $343 million of NBN cash, which equates to 2.8 cents per share.

So doesn't look to me that Telstra is very dependent on NBN cash to pay its dividend of 28 cents per share but then again I'm only a pleb punter. I'm not an investment guru who gets to be interviewed on 'Your Money Your Call'

 

[notting]

Re: TLS and a change of Govt.

Can anyone direct me to a credible analysis of the likely impact on TLS shares of a change in Govt. Given how widely held these are I would have thought it a topic fairly well covered. I have heard the issue addressed a couple of times on Your Money Your Call but the "experts" seemed fairly clueless

Their not clueless. These guys were calling it "Do not touch with a 10 foot pole, when it was 2.60 something. " Not sure what the word is for that ruinous .:flush:
Ya wouldn't want to be looking to them for insight into what it might do next!!!

The conservative money is still coming in from cash looking for yield.
Whilst there is still a premium its likely to hold.
I thought it was a buy below 3.

I don't think the libs are going to modify too much, everyone knows their a shoe in and there's no great sell off after the div payment .
Wait for the trend to end, there's plenty of room to give back a little on a reversal.

 

[McLovin]

The half year cash flow usually doesn't cover the divvie but the full year does. Last year they would have ended up with ~$600m surplus after paying dividends.

 

[Country Lad]

TLS free cash flow (after paying dividend) for 2011/12 was $349 mil. The estimates for next periods according to one broker's research in $millions are:

2012/13 351
2013/14 (105)
2014/15 1,358

Cheers
Country Lad

 

[McLovin]

TLS free cash flow (after paying dividend) for 2011/12 was $349 mil.

How did you get that number? I just checked and it looks to me like $568m including all capex. Presumably at least some of that capex was growth capex which would make FCF even higher. In any event, I don't understand why all these pundits are saying they can't afford their dividend.

 

[Bintang]

How did you get that number? I just checked and it looks to me like $568m including all capex. Presumably at least some of that capex was growth capex which would make FCF even higher. In any event, I don't understand why all these pundits are saying they can't afford their dividend.

Annual report 2012:
Telstra reported free cashflow of $5197 million
Dividend payout was $3475 million

1st half report 2013:
Telstra reported free cash flow of $2155 million
Dividend payout was $1739 million

Now In the You tube video Roger Montgomery states bold as daylight that Telstra's 2013 first half free cash flow was $600 million and he was reading from Telstra's 'statement of cashflows'.
Either he doesn't know what free cash flow is or he needs glasses.
Glasses mus be the explanation because how could an 'expert' guru investment advisor be so completely wrong?

 

[McLovin]

Annual report 2012:
Telstra reported free cashflow of $5197 million
Dividend payout was $3475 million

1st half report 2013:
Telstra reported free cash flow of $2155 million
Dividend payout was $1739 million

Now In the You tube video Roger Montgomery states bold as daylight that Telstra's 2013 first half free cash flow was $600 million and he was reading from Telstra's 'statement of cashflows'.
Either he doesn't know what free cash flow is or he needs glasses.
Glasses mus be the explanation because how could an 'expert' guru investment advisor be so completely wrong?

You've omitted interest payments. They are usually excluded to come up with FCF but included to work out "FCF to equity".

I can see what he's doing but seriously, to take a behemoth like TLS and say their dividend is unsustainable on the basis of a single half year report is a bit disingenuous.

 

[Bintang]

You've omitted interest payments. They are usually excluded to come up with FCF but included to work out "FCF to equity".

I can see what he's doing but seriously, to take a behemoth like TLS and say their dividend is unsustainable on the basis of a single half year report is a bit disingenuous.

Still think it only requires an ability to read:

 

[McLovin]

Well, it's hardly surprising that management use the most flattering calculation; unlevered FCF.

 

[Country Lad]

How did you get that number?

By summing the last 4 lines in the attached.

What constitutes the definition of "Free Cash Flow" seems to be an issue here. I hold the old fashioned view that FCF should be the the amount left over after everything is paid, including dividend, but unfortunately many companies define it it more loosely and in particular before dividend payment - more along the lines of this is the amount left over from which we will pay a dividend. Not really free cash flow in my view, seeing it is no longer there after paying the dividend. May be logical for the half yearly as the dividend has not yet been paid but not for full year accounts.