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3 reasons the Telstra Corporation Ltd share price won’t head lower in 2017

Source: Telstra presentation

It’s been a rough time for Telstra Corporation Ltd (ASX: TLS) shareholders lately, what with the plunge in their shares and the deluge of negative news flow.

source: Google Finance

I’m not overly keen on the company myself. However, I think there are a few good reasons the share price might have reached its nadir already:

  • The dividend

Whether it gets cut or not, Telstra will likely still pay a market-beating dividend. The lower the share price falls, the more valuable the dividend becomes and, since Telstra’s business is not cyclical and very unlikely to evaporate overnight, this places a floor under the company’s share price.

  • The professionals aren’t betting against it

Given all the negative news about how Telstra is going to be outcompeted by the likes of TPG Telecom Ltd (ASX: TPM) and the like, readers might expect that the company is being heavily short sold. That’s not the case, with just 0.7% of its shares held for short sale. That still reflects a pretty sizeable bet, but the short volume is less than at some of Australia’s big banks or miners.

  • The business

Telstra remains one of the most powerful brands in Australia, and the #1 go-to for mobile customers. That’s unlikely to change in a hurry, and the company is investing heavily in its network and products to ensure it remains a market leader. In fact, Telstra’s dividend, combined with the reliability of its earnings, could make it a market-beating investment even with no profit growth.

If you're still not convinced, check out these 3 high-yielding, fast growing alternatives to Telstra instead:

Top 3 ASX Blue Chips To Buy In 2017

For many, blue chip stocks means stability, profitability and regular dividends, often fully franked..

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The Motley Fool's in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool's Top 3 Blue Chip Stocks for 2017."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

If you're expecting to see the likes of Commonwealth Bank, Telstra and Wesfarmers shares on this list, you'll be sorely disappointed. Not only are their dividends growing at a snail's pace, their profits are under pressure too due to the increasing competitive environment.

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The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Telstra Limited. Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. The Motley Fool Australia owns shares of Vocus Communications Limited. 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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