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Dividends in focus at Telstra (ASX:TLS) and AMP (ASX:AMP)


Telstra (ASX: TLS) – Shares closed the day +2.5 per cent on the back of a reasonable result and a series of amended growth targets. CEO Andy Penn delivered a result which was in line with guidance despite a fall in underlying earnings of 14.2 per cent to $3.3 billion. Similarly net profit fell 2.2 per cent to $1.1 billion as cost-cutting action continued.

  • Guidance for FY 2021 was narrowed to $6.6 billion-$6.9 billion from $6.5 billion-$7 billionn which was in line with market expectations, however, Penn went one step further and gave guidance for FY22 and FY23:

    • FY22 guidance was for underlying EBITDA growth to fall in the mid-to high-single digits, in percentage terms.

    • Underlying earnings to be between $7.5 billion-$8.5 billion for 2023

    Reading between the lines, he is forecasting growth in underlying earnings of around 18.5 per cent a year over the next three years. A deliberate message from a CEO who is confident he can deliver – and perhaps he can. Penn made some bold announcements that have brought hope back into the share price. Among them:

    • By June 2021, Telstra will have 75 per cent of the population receiving 5G coverage
    • Cost reduction program of $2.7 billion by FY22 remains on track and “may exceed expectations.”
    • Bringing retail experience inhouse, ending its arrangements with the individual licensees and with its biggest licensee, Vita Group (ASX: VTG).

    All positive announcements ,which should increase sales and lower costs and help Penn reach his goals. Most importantly though, the dividend was retained at 16 cents per share. Overall a great result. Could this be the inflection point shareholders have been waiting for?

    AMP (ASX: AMP) – Shares took a beating, falling as much as 11 per cent and closing on its low of the day after its US-based suitor, Ares Management, withdrew its $6 billion takeover offer, pitched in November at $1.85 a share. It was a huge blow for the troubled wealth management firm – and its long-suffering shareholders – hurt from years of scandal. The private equity firm is however still interested in AMP Capital, the $190 billion funds management unit. The reason for the withdrawal, is in part, due to worries over the deteriorating performance of AMP’s wealth management business.

    It offered no solace to newly appointed CEO Francesco De Ferrari, who was appointed to turn the company around; yet the business was put up for sale just after his appointment by the board. It’s going to be a tough and long job now to field interest for a company no-one wants as a single piece -meaning the board will need to earn its keep.

    The lowlights of the report were:

    • No final dividend to shareholders, once again;
    • Statutory profit of $177 million for 2020, reversing the $2.5 billion loss from the previous year;
    • Earnings at AMP’s Australian wealth unit fell 44 per cent from 2019

    The Week Ahead

    Reporting season steps up a gear this week, with another of important reports that will provide real insight into the health of the economy.

    Some things to watch include:

    • Monday – Can the incredible retail run continue for JB Hi-Fi Ltd (ASX: JBH) and Co.?
    • Tuesday – BHP Group (ASX: BHP) has benefited from a stellar run in the iron ore price, but will this convert into higher dividends?
    • Wednesday – After Westfield (ASX: URW) cut its dividends for three years, can Chadstone shopping centre half-owner Vicinity Centres (ASX: VCX) surprise with rent collections and foot traffic?
    • Thursday – CSL (ASX:CSL) has fallen as the rotation into value gathered steam, how much did the US$ impact on profit growth?
    • Friday – Can Wesfarmers’ (ASX: WES) dominance through Officeworks, Bunnings and Catch continue online?

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