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There’s an actual gem of a dividend revenue inventory within the FTSE 250 index and it’s known as Telecom Plus (LSE: TEP).
It simply appears to maintain on giving for its shareholders. And right this moment, 21 November 2023, the agency issued its half-year outcomes report with the strapline: “Comfortably on monitor to double the dimensions of our high-quality buyer base.”
That sounds spectacular. And it in all probability is realizing Telecom Plus.
A constant report
The corporate has an enviable monitor report. It owns and operates the Utility Warehouse model and describes itself because the UK’s main multiservice utility supplier. Meaning it provides bundled family companies, reminiscent of power, broadband, cell and insurance coverage all by means of one buyer account.
Individuals clearly just like the service. Prospects benefit from the comfort of a single month-to-month invoice. And the agency additionally provides that they get “constantly good worth throughout all their utilities and distinctive service ranges”.
A giant a part of the enterprise mannequin is the way in which the service is marketed. And I’d say it’s a degree of distinction between Telecom Plus and its rivals. Prospects join by way of a community of native ‘Utility Warehouse Companions’ all throughout the nation. In different phrases, particular person brokers.
Anybody can apply to grow to be an agent. The set-up jogs my memory of the way in which well-liked direct advertising and marketing corporations used to function within the 60s, 70s and 80s, reminiscent of Tupperware, Amway, Kirby and plenty of others.
In a lot the identical means that these older companies operated, the companions at Telecom Plus advocate the agency’s companies to buddies, household and folks they know by phrase of mouth.
The system works. And the enterprise has delivered uninterrupted development in buyer numbers “for each certainly one of its 25+ years”. The administrators suppose the agency’s report means there’s sustainable double-digit buyer development and earnings potential forward.
Good buying and selling, weak share value
In the meantime, the figures in right this moment’s report are spectacular. For the six months to 30 September, income rose by simply over 57% 12 months on 12 months. And adjusted revenue earlier than tax moved round 36% increased.
The administrators rewarded shareholders by slapping just below 6% on the interim dividend. And that provides to a dividend report that could be a marvel to behold. Shareholder cost continued by means of the pandemic. And the compound annual development charge of the dividend is operating at a tempting-looking determine just below 10%.
However the share value has been sucked down with the final malaise out there not too long ago. And that state of affairs has pushed up the dividend yield to nicely over 5% on a forward-looking foundation for the buying and selling 12 months to March 2025.
As I write, the shares are altering fingers at round 1,672p. However my guess is that they’ll probably go increased as the following bull market unfolds for shares.
Nonetheless, there are dangers for brand spanking new shareholders. Maybe the largest being that the corporate absolutely depends on with the ability to supply good-value offers for its finish clients. However the market could be very aggressive. And it’s potential that different corporations might undercut costs sooner or later.
That stated, one of many benefits of the advertising and marketing arrange at Telecom Plus is that it saves on prices. And, on steadiness, I’d suppose the corporate is nicely value additional and deeper analysis now with a view to contemplating it for a long-term diversified portfolio.
