When the interest rates are rising it becomes expensive for growth stocks to borrow money to fund their expansion and growth. On the other hand, in the low rate environment investors scramble for dividend stocks to switch from cash investments where returns dwindle. However, growth stocks that pay dividends too, remain attractive all the times. Two such stocks are
Telstra Group Limited (ASX: TLS)
Telstra Group Limited releasing its financial results for the fiscal year 2024, concluding on 30 June 2024, reported an increase in Underlying EBITDA of nearly $300 million, representing a growth of 3.7%, bringing the total to $8.2 billion. This increase in Underlying EBITDA positively impacted the Underlying Net Profit After Tax, which rose by 7.5% to reach $2.3 billion.
During the reporting period, the company allocated $1.3 billion towards spectrum licenses, which included $616 million for the 850 MHz band and $546 million for the 3.4 to 3.7 GHz band, aimed at enhancing the 5G experience for mobile users across Australia. In February 2024, Telstra set a new global benchmark for 5G uplink speed in collaboration with Ericsson and Qualcomm Technologies, Inc., enabling customers to benefit from faster and data that is more dependable uploads on their 5G Standalone networks.
The company is advancing considerably in its T25 strategy, which focuses on enhancing customer experiences and resetting its Enterprise business. Notably, the company has raised its 5G population coverage to 89%, bringing it closer to the goal of 95%. Additionally, the expansion of the company's land coverage, combined with its superior speed, underscores its potential to seize a larger share of the market.
Telstra demonstrates a robust commitment to enhancing and broadening its capabilities and customer experiences, which may enable it to realize a significant breakthrough in its historically stable financial performances.
Transurban Group (ASX: TCL)
Transurban Group released its annual financial results for the fiscal year concluding on 30 June 2024, on 8 August 2024. It reported a 1.7% increase in Average Daily Traffic (ADT), driven by growth across all regions and the introduction of new assets.
The proportional EBITDA reached $2,631 million, reflecting a 7.5% rise, bolstered by a 6.7% increase in proportional toll revenue, which amounted to $3,535 million. Additionally, the EBITDA margin improved from 72.4% in FY23 to 73.1% in FY24.
The management successfully controlled operational costs, ensuring that cost growth remained below the inflation rate of 3.6%.
The company maintained a robust balance sheet, with approximately $4.2 billion in corporate liquidity, and 88.2% of its debt portfolio hedged, along with a well-managed weighted average cost of AUD debt at 4.5%.
For FY24, the distribution was set at 62.0 cents per stapled security (cps), indicating a 7% increase and aligning with the guidance provided during the FY23 results announcement. This distribution is fully supported by Free Cash (excluding Capital Releases) of 63.2 cps, covering 102% of the distribution.
TCL maintained a cash position of $2.04 billion as of 30 June 2024.
The company is achieving notable advancements in its project development, as evidenced by the ongoing progress of the West Gate Tunnel Project in Melbourne, which is currently 80% complete and is anticipated to be delivered in 2025. Similarly, the 495 Northern Extension Project in North America is also making headway, with a completion date set for 2025. The company forecasts a distribution of 65.0 cents per share for FY25, which is projected to represent a 5% increase relative to FY24.
The project development initiatives of TCL are notably driven by a substantial market demand, which facilitates considerable orders and an extensive scope of work. This demand is primarily attributed to the pressing need for traffic enhancements and reduced travel durations, particularly in urban areas where the company is active. Furthermore, the company's ongoing financial growth trajectory is promising for shareholders, as indicated by a robust dividend yield of 4.69%, an improving distribution profile, and relatively low dilution.
Source: Company’s Report
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