What’s gone wrong with Telstra shares?

Telstra (ASX: TLS) shares fell as low as $4.68 on Friday as investors suddenly deserted it and other high yielding stocks, switching their allegiances back to large-cap mining stocks including BHP Billiton (ASX: BHP), Rio Tinto (ASX: RIO) and Newcrest (ASX: NCM).

Telstra shares have now fallen almost 8% from their early May high. Hell hath no fury like a market-darling scorned.

It was only a few short weeks ago when punters were flocking to Telstra shares, their 28c fully franked annual dividend being the main attraction. I can only put the slump down to fickle, short-term focused investors locking in profits after Telstra’s stellar run over the past year.

With the RBA still expected to cut interest rates again this year, and with some economists predicting the cash rate could fall as low as 2%, by comparison Telstra’s near 6% dividend yield looks very attractive.

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Of the companies mentioned in this article, Motley Fool contributor Bruce Jackson has an interest in Telstra and BHP.


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