The S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) is hovering just 1.7% below its six-and-a-half year high of 5,554 points, and will rely on some of Australia's largest and most widely-held stocks to break through that level.
Commonwealth Bank of Australia (ASX: CBA), Telstra Corporation Ltd (ASX: TLS) and Woolworths Limited (ASX: WOW) have all delivered incredible performances in recent years, but do they have what it takes to go even further? Here's what you need to know about Australia's most popular stocks…
Commonwealth Bank
Investors in Commonwealth Bank, which is Australia's largest company by market capitalisation ($131.8 billion), couldn't have asked for a better run. Its shares have soared an astonishing 229% since early 2009, while that figure is over 300% when dividends are included.
With the bank's shares now sitting just below their all-time high however, it appears that the party may be coming to an end very soon. It has been said that the stock is now "priced for perfection" and it is likely that momentum and its strong dividend yield are playing a role in keeping it around the $81 mark. With earnings likely to come under significant pressure in the future, Commonwealth Bank is a stock to avoid.
Telstra Corporation
Telstra experienced its trough later than Commonwealth Bank, hitting a low of around $2.55 late in 2010. Since then, it has given rise to a 108% capital gain, or around 147% when dividends are included.
Although the shares are sitting just below their highest level since 2005, there are still plenty of reasons to like the stock for the long term. To begin with, its dominance in Australia's telecommunications industry is second to none. Despite often charging a higher premium for its services, Telstra continues to attract customers from rival carriers while it is also set to grow earnings handsomely in international markets in the coming years. Offering a forecast 5.5% dividend yield (fully franked), this stock is definitely still compelling.
Woolworths Limited
Together with Wesfarmers Ltd (ASX: WES), Woolworths dominates Australia's grocery sector. In the last 12 months alone we have seen the extent of that control, which has come at the expense of other large Aussie companies like Coca-Cola Amatil Ltd (ASX: CCL) and Metcash Limited (ASX: MTS).
However, while there is no questioning the quality of the business, investors need to look at the price they would be willing to pay for a stake. Currently trading at $35.94, it is trading on a forward P/E ratio of 17.3, based on forecasts for the 2015 financial year. Not only that, the stock only yields 4% which doesn't compare to various other blue-chip stocks that are also trading at compelling prices. While I don't think investors should sell their shares, I believe there are far better opportunities investors could be taking advantage of…
An ASX stock that could DOUBLE your money…
