👉 Background: Telstra is Australia’s biggest telco company and one of the most recognisable brands in the whole of Australia. It provides retail services to over 22 million Australia customers. But, over the past few years, Telstra has been reshaping its business to prepare for a changing telco market, including cutting 9% of its workforce as part of its T25 strategy.

‍👉 What happened: This week, the big T announced a jump of 1.5% in its revenue to over $11.5 billion for the half to December 31. On top of that, its net profit jumped 6.5% to $1.03 billion. This is thanks to better ARPU from its mobile customers as well as the sale of Foxtel and its VC arm during the period.

‍👉 What else: With the T25 turnaround on track, Telstra will buy back $750 million of shares, and it has jacked up its dividend by more than 5%. In other words, investors are getting a little dividend sweetener for sticking around.

What's the key learning?

💡Investors tend to slot companies into three big categories: growth, income, or value. It's a bit like choosing a mobile plan.

💡Different investors have preferences for different types of companies.

• Growth stocks:
  • These are the companies that are expected to grow faster than the market average. They’re the ones reinvesting every dollar back into their business instead of paying dividends. Think: Meta - who paid its first dividend in 2024 - 12 years after going public.
• Income stocks:
  • These are companies that pay out a portion of their profits to shareholders, on the regular, like Telstra. These income stocks typically attract investors who want regular payouts, like retirees.
• Value stocks:
  • These are companies that are undervalued based on the financial performance. This is Warren Buffett's favourite type of companies.

💡Telstra’s share price has only increased just 4% over the past 5 years (before yesterday’s update). But factor in all those dividend payouts, and shareholders have pocketed nearly $1 per share in cash over that same 5 year period.