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How Telstra's Deal for NBN Helped Establish A Shareholder Reinvestment Plan

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|Feb 12|magazine7 min read

It's very common for public companies to allow their shareholders to reinvest their dividend back into their share of the company. Telstra is relaunching their plan to do so after announcing the company's first half profits jumped 22.4 percent. The $2.1 billion in profits is the strongest mobile revenue growth in three years.

Telstra's good quarter is thanks to the mobile company's strong growth, as well as its signing of a deal for the National Broadcast Network in Australia and an impressive jump in mobile subscribers. And while some wanted a high return for the investors, Telstra's CEO David Thodey stressed that this was only the beginning of the benefits its shareholders will see from the NBN deal.

"We're just at the early stages and we've had a slower beginning on NBN than what had been forecast by the government," Thodey said.

"When you come back and look at that, we're obviously prudent in terms of setting any precedence going forward. We've made the decision, I'm sure the cash will flow, but the timing is still to be determined."

Read related articles from Business Review Australia:
Telstra Options $1 Billion Buyback for Shareholders, First in 8 Years
Australian Companies Like CSL Limited Choosing Buyback Options More Often

The telco's dividend has been kept at 15¢ this quarter; the first half dividend will be paid to shareholders March 27.

Andy Penn, Telstra CFO, echoes Thodey's sentiments about deciding to not raise the dividend for the third straight half.

"I think it's about pitching the dividend at right levels so it gives shareholders confidence that we will be able to sustain that dividend and grow that dividend over time," Penn said. The company wants to strike a balance between providing shareholders with returns and allow the company to have the financial flexibility to future ventures like acquisitions.

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Information sourced from Sunday Morning Herald.