Motley Fool Australia

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.

Man who said buy Kogan shares at $3.63 says buy these 3 ASX stocks now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

In this FREE STOCK REPORT, Scott just revealed what he believes are the 3 ASX stocks for the post COVID world that investors should buy right now while they still can. These stocks are trading at dirt-cheap prices and Scott thinks these could really go gangbusters as we move into ‘the new normal’.

*Returns as of 6/8/2020

Related Articles...

Latest posts by Catherine Baab-Muguira (see all)