Shares in telco giant Telstra Corporation Ltd (ASX: TLS) have again trended higher today as investors responded to its recent set of strong full-year results.
With its share price up 84% in the past three years and an additional 84.5 cents in dividends, investors have easily doubled their money.
So, with shares sitting at prices not seen since June 2001, is it a bargain, fairly priced or overvalued?
Prior to its recent full-year results, regular fool.com.au readers will know I said anything above $4.70 per share would be a good buy, but not a great buy.
Despite a strong result (which exceeded my expectations) I still believe its shares are not cheap and I wouldn't be prepared to pay over $5.00.
There is a chance Telstra could go on to beat the market from here. To do so it'll require an earnings boost from the Network Application Services (NAS) and International divisions. Whilst these hold exceptional long-term promise, I don't think they'll generate enough earnings to support higher share prices in the short term.
In the coming year, we'll likely witness growth from its mobiles division but I expect it'll be more modest than what the market has become accustomed to in recent times.
In addition, although it boasts a forecast 30 cent fully franked dividend, when interest rates rise (Yes, I agree that could take a while) and investors once again see value in fixed income securities such as bonds, term deposits and savings accounts, I think its share price could experience some downwards selling pressure.
Buy, Hold or Sell?
I think Telstra is a great stock for the ultra-long term but I'm waiting for a lower price before hitting the buy button. I'd currently rate it as a 'Hold'. However if your priority is generous and regular fully franked dividend income then sure, you could consider adding it to your portfolio. But when there's other GREAT dividend stocks available at better prices, why would you risk it?
