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I bought shares in FTSE 100 headline Airtel Africa (LSE: AAF) just over a year ago. I’m a big proponent of long-term investing, which I would define as a five to ten year period. Here’s why I’m tempted to add more stocks to my holdings.
Telecommunications in Africa
Airtel Africa is a mobile money and telecommunications services company operating in Africa. I am encouraged by their modus operandi as telecommunications is a burgeoning market on the African continent and there is a lot of market share that the business can capture.
The Airtel share price chart over the past year is similar to a thrilling rollercoaster ride that I enjoyed in my formative years. The meandering nature of the price is mainly due to macroeconomic and geopolitical issues. As I write, the shares are trading at 118p, up 4% from 113p at this time last year.
Powering up the FTSE 100
The story of Airtel and its rise to the UK’s top index is fascinating. The company was founded in 2010. Only two and a half years after joining the FTSE, managed to reach the top of the table at the beginning of last year. Rapid performance growth and increasing market share contributed to this.
So why am I tempted to buy more Airtel shares? In simple terms, I see Airtel as a great long-term growth stock and the recent volatility in its share price as well as the impressive half-year results have caught my attention.
Airtel shares look like good value for money to me at the moment with a P/E ratio of 17. Additionally, the stock would add to my passive income with a dividend yield of over 4%, which is above the FTSE average 100 out of 3.8. %. However, I understand that dividends are never guaranteed.
Reviewing Airtel’s results released last week, there were some key positives that show me that the business is doing well. Its customer base grew by 10%, increasing an already impressive market share. Then revenue, earnings per share and EBITDA also increased.
Risks and what I’m doing now.
There are a couple of issues that Airtel might have encountered that could affect the business. For example, in its most recent results, changing exchange rates affected performance, as the company reports money earned based on the current exchange rate and what it could have earned if the currency did not fluctuate. This is not uncommon for companies that report in multiple currencies. In the case of Airtel, this has hampered business as it reports in the local Nigerian currency, a core market for the business. The Nigerian currency has been falling in recent months. I think this is one of the reasons why Airtel stock hasn’t taken off recently.
Another issue for me is geopolitical issues. Africa is prone to volatility, which could hamper growth plans and company performance. This is out of Airtel’s control, but it’s something I’m wary of.
To conclude, I am a fan of Airtel stock and think it is one of the best growth options in the FTSE 100 index. I am thinking of buying more shares next time I have some cash to invest. The growing demand for telecoms and mobile money services in Africa, as well as a passive income and decent valuation at the moment make adding more shares to my holdings an easy decision.
