MENU

Investors take note: Telstra getting cheaper

In recent days, shares of Telstra (ASX: TLS) have been getting cheaper.

As the S&P/ASX 200 index (Index: ^AXJO) (ASX: XJO) has fallen about 3% in recent days, Telstra shares have fallen by nearly 6%. Today, Telstra shares are trading for 17 times earnings and on an EV to EBITDA basis of about 7.

A strong business – let us count the ways

Telstra has competitive advantages galore. It’s got an incredibly strong brand – ranking as the third top brand in Australia, just behind Woolworths (ASX: WOW) and BHP Billiton (ASX: BHP), according to the Australian Marketing Institute.

Its position as the nation’s leading telco is nigh unassailable. Per a succinct summary on the company’s website: “Telstra’s network and systems infrastructure underpins the carriage and termination of the majority of Australia’s domestic and international voice and data telephony traffic.” With the NBN, Telstra may cede some of this infrastructure, but it will be handsomely compensated.

The growth of its already large domestic mobile customer base may be somewhat limited — with sales growing in the mid-single digits as of the first half of 2013. Still, Telstra’s overseas business has been growing, with sales climbing over 10% and 321,000 new CSL customers added, also as of the half year 2013 report. Its future is also underpinned by the growth in cloud computing and its data centre services, with network applications and services posting strong growth as well.

The company also owns 50% of Foxtel, with News Corp (ASX: NWS) owning the other half. Telstra collected a $55 million dividend from Foxtel in the first half of 2013.

The case for investors

For many investors, one of the most attractive points will be Telstra’s fully franked 28-cent dividend, which makes for a yield in the 5.8% range.

Looking to judge your entry point for a potential investment in Telstra? Wondering whether you should add to your position, or perhaps sell your shares? Get a top analyst’s latest Telstra recommendation in our brand-new investment report. Click here now, your copy is FREE!

More reading

Motley Fool contributor Catherine Baab-Muguira has no financial interest in any company mentioned in this article.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.