Telstra Looks Like a Strong Buy
There was a sudden surge in the share price of Telstra in late trade today, Thursday.
While it is to early to be calling a bottom in anything I find Telstra very attractive at current prices. The current yield is 8.9% and held within a Self Managed Super Fund that translates to over a 10% yield. The dividend appears safe at the moment as it is supported by cash flow.
Yesterday’s close of $3.08 was the yearly low and it is easy to make a case for Telstra being back over $4.00 this year.
This article Telstra’s safety cable may prevent a nasty fall, at the Herald Sun (which is not a paper I’d normally reference) provides an good perspective on why Telstra has played its cards right in pulling out of the national broadband network.
Telstra will be able to get speeds of 100-200Mbps to some two million homes in the two key cities of Melbourne and Sydney, probably before the end of next year.
With a 10% yield and excellent forward thinking strategy in place, Telstra looks like a great place to park some cash looking for a good home.
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Hmmm…..Telstra – what a shocking stock this is. Trading at $2.80, intrinsic value around $2 – $2.20. What most investors see is the massive dividend yield, but fail to see that Telstra doesn’t make enough cash flow/profits to keep making those dividends and at some stage, Telstra is going to have to cut the dividends back.
I’d be happy to make a prediction that Telstra’s share price won’t be much higher in 10 years time than it is today, with substantially lower dividends.
Cheers
mike
Mike, Telstra’s earnings and gross cash flow have been higher than dividends in all but two years. While taxable income in future years may not be enough to fully frank a 28c dividend, the board has said the dividend will be maintained for two years. I continue to see Telstra as part of a good portfolio base providing an excellent income yield and less risk than most other S&P/ASX 20 companies.
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