Based on amounts paid over the past 12 months, this stock could produce income of £95 for every £1,000 invested. Sounds too good to be true?
Let’s see.
What?
Telecom Plus (LSE:TEP), which trades as Utility Warehouse, describes itself as a “unique platform for bundling subscription-style essential household services”. What does this mean? It sells energy, telephone and broadband contracts, and home insurance.
During the year ended 31 March 2025 (FY25), the biggest contributors to revenue were electricity (49%) and gas (34%) sales.
More recently, its FY26 year-end trading update said its adjusted profit before tax was expected to be at “the bottom end” of guidance. It blamed reduced energy consumption following an “unseasonably warm winter”.
Fluctuating energy usage and fierce competition in all of its markets are the group’s principal challenges. Annual contracts help to ensure a certain degree of customer stickiness but there are plenty of rivals looking to take market share across all its divisions.
A strong track record
Despite this, the group’s consistently raised its adjusted earnings per share (EPS) since 2021:
- 2025 – 117.7p
- 2024 – 107.7p
- 2023 – 97.7p
- 2022 – 63.0p
- 2021 – 57.2p
Over this period, its full-year dividend has increased by 65%.
But following discussions with shareholders, the group’s going to change its distribution policy. It intends to continue returning 80% of its post-tax profit to shareholders. However, in future, it will be split between dividends (at least 50%) and share buybacks. This means the yield from its dividend could fall. By how much? It’s hard to know.
Positively, customer numbers increased by 23% to 1.43m in FY26. This includes 193,000 that are being migrated from TalkTalk. Excluding this, there was a 10% rise.
Looking at its balance sheet, its ratio of net debt to adjusted EBITDA is 1.1, up from 0.8 a year earlier. Most of the increase was caused by the TalkTalk deal. Even so, a ratio of around one doesn’t seem excessive to me. In theory, it means it could clear its debts in one year from its operating cash flows.
What’s not to like?
A loss of confidence?
Unfortunately, its share price appears to be in decline. In November 2022, the group’s stock was changing hands for around £25. Today (15 June), it’s around 60% lower.
This appears to coincide with the introduction of the government’s Energy Price Guarantee, which limited the increase in energy bills following a global gas price spike. But this was funded by the taxpayer, not energy suppliers, and expired in 2024.
The Ofgem price cap remains. But this has been around since 2019.
It’s almost as though I’m missing something obvious. Yes, customer growth is slowing, but as we’ve seen, EPS is rising.
Using its unadjusted EPS, its price-to-earnings ratio of 10.4 is well below its five-year average of 20.74, which could be a good entry point.
A final thought
To be honest, its falling share price makes me anxious. Until I’m convinced that Telecom Plus will be able to change investor perceptions, I don’t want to invest.
As attractive as its yield might be, the FTSE 250 stock’s not for me. Instead, I reckon there are better opportunities to consider elsewhere. In fact, there are 11 stocks on the index that are currently yielding 9% or more.
Should you invest £5,000 in Telecom Plus Plc right now?
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James Beard does not own shares in any of the companies mentioned.
