Is Telstra Corporation Ltd's (ASX: TLS) juicy fully franked dividend the antidote to Australia's current low interest rate environment?
After all, it's got a great dividend and sits at the forefront of a significant economic trend. That is, more Australians are now using the internet for everyday tasks, as high speed connections pervade our lives.
Undoubtedly Telstra's dominance across internet provision, mobile coverage, pay-tv, network applications and cloud computing bodes well for future profitability.
But is it worth transitioning your hard-earned cash into Telstra for its impressive 4.6% fully franked dividend? I don't think so.
In my opinion, whilst Telstra's ability to generate wide – yet sustainable – profit margins is unrivalled across the S&P/ASX200 (Index: ^AXJO) (ASX: XJO), it's not a good income play today.
That's because there is a difference between price and value, and at today's prices Telstra shares don't appear to have enough downside protection to warrant a purchase of its stock.
Remember, it wasn't that long ago (in fact, it was 2011) when Telstra shares were sporting a grossed-up dividend yield over 13% and every market commentator was beating it up. That was the time to buy in, not now.
As Warren Buffett says, "Be greedy when others are fearful and fearful when others are greedy." Those seeking to emulate the success of Buffett have time on their side, to wait for the right buying opportunity.
As the saying goes, patience doesn't lose you money.
So whilst it may be tempting to buy Telstra stock for its juicy dividend – especially if the Reserve Bank of Australia again lowers interest rates this afternoon – it's important to remind ourselves that share prices go up and down. At the moment, Telstra shares are up.
