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Caution: Telstra Corporation Ltd shareholders look out below!

Credit: Olivia Wilson

Watch out below! The Telstra Corporation Ltd (ASX: TLS) share price is down 18% in 12 months.

Source: Google Finance

Source: Google Finance


Indeed, despite Telstra shares often being perceived as a way to counter the current record-low interest rates, it seems the dividend appeal of Telstra shares isn’t rubbing off on the market.

At $5.18 apiece, yesterday’s closing price, Telstra shares trade on a forecast fully franked dividend yield of 6.1%. If we take into account those franking credits, which eligible shareholders will likely receive in their next tax return, the yield blows out to an impressive 8.7% — try getting that from the bank.

Still, it seems the lacklustre profit performance of Telstra is taking its toll on investor sentiment. That’s despite the massive dividend and an average analyst price target on Telstra shares being $5.57, according to the Wall Street Journal. My personal price target is slightly more than average.

Foolish takeaway

Predicting short-term share price movements with 100% accuracy is impossible. Instead, investors should focus their attention on understanding Telstra’s business and make an informed judgement over the future profitability of the business. Then, determine whether the reward from holding its shares is worth the risk.   

Indeed, nobody knows for sure if the worst is over for the Telstra share price. However, personally, I'd rather look for other - faster growing - dividend shares to add to my portfolio, such as the one The Motley Fool's expert analysts hand-picked as their best dividend share idea for 2016.

Indeed, our resident dividend experts named their Top Dividend Share for 2016. Not only are the shares dirt cheap, the company is growing and trading on a 5.6% fully franked dividend yield. Simply click here to gain access to this comprehensive FREE investment report, including the name of this fast growing ASX dividend share. No credit card required!

Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned. Owen welcomes -- and encourages -- your feedback on Google+, LinkedIn or you can follow him on Twitter @ASXinvest.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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