Telstra – Fully franked and fully on fire

Telstra shares jump above $5, with one leading broker putting a $5.80 price target on the ASX’s most popular stock

It seems I’m not the only one who thinks bank stocks have got just a little ahead of themselves.

The Australian Financial Review leads with the headlineAnalysts warn of bank share bubble“, saying…

“Australian bank shares have entered a risky great bubble territory similar to the peak of the internet stock boom that ended in a crash last decade, leading fund managers and the country’s top-rated bank analyst have warned.”

Let’s get one thing straight from the outset.

The share price gains for the big four banks, although stellar, are in no way similar to, or should even be compared to the internet stock boom. That was on a completely different level. I know. I lived it, managing a Dotcom through the boom, and the bust.

On Tuesday I said our banks are not a one-way bet, especially as slower economic growth is likely as Australia faces a period of higher taxes, lower middle-class welfare, the end of the mining boom, and higher unemployment.

On the flipside, the RBA still has a long way to move on interest rates.

My guess is they’ll remain on hold at 3% in May, but I’m with the consensus that they will move lower over the coming 12 months, moving down to 2.5%, and maybe even lower.

If you thought term deposit rates are low today, look out below later this year…

Telstra storms through $5, on its way to $5.80??

Yesterday, Telstra (ASX: TLS) shares broke through $5 to trade at their highest level in 8 years.

It’s been some ride since August 2011 when, with the shares trading at around $2.90 we called Telstra our “…number one ASX 20 pick for the long term as it provides excellent cash returns, limited downside and reasonable upside potential.”

Even as recently as January this year, in the face of falling interest rates, I suggested Telstra shares could trade as high as $5.

And the party may not be over. Yesterday, Telstra confirmed it aimed to lift its dividend over time, and that it added an astonishing 600,000 4G devices in less than three months, cementing its lead as our foremost mobile network operator.

Overnight the Dow slumped almost 140 points on slower growth in American payrolls and manufacturing, sending the ASX down in its wake in morning trade…

I know you might be finding this hard to believe, but even the banks are having an off day, although it must be noted their share price falls are very modest, especially in the context of the HUGE run they’ve had over the past 12 months.

But not Telstra.

It’s up another 3 cents to $5.07, perhaps buoyed by Bell Potter’s Charlie Aitken $5.80 call on the stock. And, as reported in The Age, Aitken says that price target, based off a 5% yield, could prove conservative.

Taking Flight — Flight Centre rockets into the orbit

Another stock flying higher today is Flight Centre (ASX: FLT).

Australia’s largest travel agency has raised its forecast for underlying pre-tax profits to between $325m and $340m for the year to June, from its previous guidance of $305m to $315m.

In a wonderful piece of timing, and great stock-picking judgement, only yesterday our very own Catherine Baab-Muguira wrote a piece about Flight Centre in The Sydney Morning Herald titled An ‘unbeatable’ investment?

Maybe. In a slow growing economy, it takes a special company to lift its guidance.

Another one for the fully franked dividend fanatics…

Flight Centre, despite the bears assuming the Internet will eat its bricks and mortar stores, goes from strength to strength. The shares trade at 52-week high, with some justification.

The icing on the cake, for all you fully franked dividend fanatics out there, is the near 3% dividend yield.

For income investors, it doesn’t have the grunt of a bank or Telstra, but it does have wonderful business momentum, and dividend growth prospects that far outweigh those of the above-mentioned behemoths.

It just goes to show there’s more to investing than banks, Telstra, Woolworths (ASX: WOW) and Wesfarmers (ASX: WES).

Sure those Big Kahunas have had a stellar run, but with valuations looking stretched, and increased analyst concerns surrounding a banking bubble, investors could be well served looking a little further down the ASX for the big winners of tomorrow.

The Domino effect of a stock at a 52-week high

Another stock joined Flight Centre yesterday in hitting a 52-week high, one of our recommended companies in our Motley Fool Share Advisor subscription-only stock picking service.

Dominos Pizza (ASX: DMP), hitting $13.99 late yesterday. At that price the stock was up 45% for Motley Fool Share Advisor subscribers. Not bad for a company that’s hardly flying under the radar. We currently rate the shares a hold.

Foolish Investing for all markets, up, down or sideways

Markets rise and markets fall. Today is a down day. Tomorrow? Who knows?

Foolish Investing is about focusing on businesses, not the day to day movements of the markets, or indeed share prices. It’s about investing for the long-term, not just when times are good, as they’ve been in recent months. And it’s about time in the market, not timing the market.

Fools…your time starts now!

Should you buy, sell or hold your Telstra shares? Get a top analyst’s latest Telstra recommendation in our brand-new investment report: “Is it Time to Sell Telstra?” Click here now, your copy is FREE!

As ever, I wish you happy, profitable and ultimately Foolish Investing.

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The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691).  Of the companies mentioned above, Motley Fool General Manager Bruce Jackson owns shares in Woolworths, Telstra and Wesfarmers.

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