I’m always looking to add shares to my portfolio that offer good long-term growth prospects. With this in mind, one FTSE 100 stock I will be adding to it is Airtel Africa (LSE:AAF). Here’s why.
Telecoms for developing economies
As an introduction, Airtel is a telecommunications and tech business with a diverse set of products. It operates in the emerging market in Africa. Currently it serves 14 countries on the continent. It is also looking to build on this existing presence. In addition to telecoms, it provides mobile money and banking services.
So what’s happening with Airtel shares currently? Well, as I write, they’re trading for 137p. At this time last year, the stock was trading for 95p. This is a return of 44% over a 12-month period.
Why I like Airtel shares
First things first, I’m buoyed by the fact Airtel is focusing its efforts on a potentially lucrative market. According to data, telecom services in Africa have increased exponentially in recent years. Furthermore, Africa is the fastest growing telecom market in the world currently. I believe Airtel could leverage its position and profile towards boosting performance and returns for a long time to come.
Moving on to Airtel shares themselves, they look great value for money on a price-to-earnings ratio of just eight. The general consensus is that a ratio of below 15 could represent value for money.
In addition to Airtel’s current valuation, the shares would boost my passive income stream through dividend payments. The dividend yield currently stands at 3.3%. This is in line with the FTSE 100 average of 3%-4%. I am conscious that dividends are never guaranteed. They can be cancelled at the discretion of the business at any time.
Lastly, Airtel has a great track record of recent performance. I do understand that past performance is no guarantee of the future. However, looking back, I can see it has grown revenue and profit for the past four years in a row. With infrastructure spending and telecoms adoption only set to grow, I believe Airtel could continue its impressive performance moving forward.
Risks to note and what I’m doing now
Despite my bullish stance towards Airtel shares, it does face some notable headwinds. Firstly, during times of economic uncertainty, like now due to soaring inflation, emerging markets are prone to more volatility. Investment for growth can be cut, and investors may turn towards safer, more developed economies and stocks. This could halt Airtel’s progress.
Next, to yield greater returns across all fronts, Airtel is required to invest significant sums of money into infrastructure. This may have a negative impact on returns moving forward.
Overall I like Airtel shares currently and plan to buy some for my holdings. Its current valuation, focus on an emerging economy with bright prospects ahead, the passive income opportunity, and recent track record all help me make my decision.