Calling all dividend investors: This one's for you

The telecommunications sector was one of the early COVID “winners”, with lockdowns accelerating the uptake of digital media and associated technologies. 

However, amid talks of an economic downturn, there's one widely-held ASX stock in this sector that is set to grow its dividends - and of course, is now capturing fund managers' attention for all the right reasons. 

It makes sense. After all, Telstra (ASX:TLS) has been: 

• Recently tipped as a top 20 inflation-beating stock by Livewire readers.
• Is a category leader with a market cap double that of its nearest competitor. 
• Has not seen an Underweight or Sell rating from any major broker since February 2021. 

So in this wire, I call on three recent high-profile guests, including Rudi Filapek-Vandyck, the founder of FN Arena, Geoff Wilson AO, the founder and chairman of Wilson Asset Management, and Michael Maughan, a co-portfolio manager of Tyndall Asset Management for the bull case on this dividend darling. 

Telstra shares have struggled to break out over the past few years

Why has Telstra been on the nose?

There are some understandable reasons why Telstra's share price has been on the nose in recent years, particularly given the well-documented competitive effect of Australia’s national broadband network. The NBN Co knocked Telstra off its pedestal as the nation’s leading fixed-line network provider, ripping a $3.5 billion earnings hole in the incumbent’s annual EBITDA.

To help mitigate some of the damage NBN continues to inflict on Telstra, soon-to-be outgoing CEO Andy Penn flagged plans to split the firm into four distinct arms last February: 

• InfraCo (Fixed telecoms)
• InfraCo (Mobile towers)
• ServeCo (consumer retail)
• Telstra International

Will this demerger be enough to turn the tide for Telstra and its long-suffering shareholders? Let’s find out what our guests think. 

He's been converted: Rudi Filapek-Vandyck

Once a hater, now a fan - Filapek-Vandyck recently told Livewire's James Marlay that the long-term outlook for Telstra would be positive regardless of its FY22 result in August, with an increase in dividends on the horizon. 

"For years, I have been making fun of people who held shares in Telstra for dividends - those that held on and saw their capital erode away over two decades," Filapek-Vandyck said. 

"I now believe that Telstra is making a recovery. People might be positively surprised over the next three to four years. We could actually see share buybacks and an increase in dividends. That hasn’t happened in a long time." 

The "recession-proof" case: Geoff Wilson AO

Meanwhile, Wilson believes the stock provides some recessionary protection to investors' portfolios. After all, we literally cannot live without our phones these days. As he tells Livewire's Sara Allen, this is the first time he has recommended the stock in his 40-plus year career in markets. 

"We look for undervalued growth stocks with a catalyst. One stock that we think is likely to make it through a recession is Telstra. I haven’t recommended it before now," he said. 

"After a decade of no growth in mobile – its major segment – it is seeing growth and mobile will be the last to disconnect in a recession. Mobile use is the new recession-proof. It wouldn’t have been on my radar previously." 

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Look at the assets: Michael Maughan

Last but not least, Maughan believes that Telstra shareholders will be treated to sustainable, growing dividends in the coming months and years. Speaking to Livewire's Ally Selby, he noted that the possible sale of its fixed infrastructure assets could provide some unexpected upside. 

"It's had a change in the short term to its core business and it's returned to growth. The mobile business is growing and the headwinds from the NBN are behind it," Maughan said. 

In the medium term, he notes it's one of the few companies that will introduce capital management initiatives and generate material returns to shareholders from asset sales. 

"If you go back to when they sold their towers business, that was a return of over a billion dollars to shareholders. The fixed assets are more than five times the size of that," he said. 

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