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Is Telstra a buy?

For those looking to the long term and want relative safety, growth and income could look no further than Telstra (ASX: TLS). For SMSFs, Telstra provides it all.

Income

Telstra shares are renowned for their 28 cent fully franked dividend but in the past year the share price has risen to 5-year highs, making the yield less attractive. Although its yield may have depreciated, interest rates have and perhaps will go further, therefore making high yielding stocks more attractive.

Growth

Although the country’s biggest telecom may not have returned capital gains as high as M2 Telecommunications (ASX: MTU), TPG Telecom (ASX: TPM) and iiNet (ASX: IIN)in the past year, compared to most of the big banks Telstra has a better upside. Even with the NBNCo’s new network still in production, Telstra improved its NPAT 8.8% for the half year ended 31 December 2012. Compare that to the banks that grew between 1-3%, it’s definitely got a better upside.

Safety

Not only do Telstra shares change hands at the highest rate on average, its $58 billion market capitalisation will give it dominance and security in the future. The industry in which Telstra operates is set to boom and with it’s a foothold on the future of technological innovation, investors can be almost certain it’ll still be around in 10 to 20 years.

Foolish takeaway

Currently, Telstra’s price to earnings is high, around 15.5. No doubt the markets expectations are weighing in on the price and although it could go cheaper in the near term, it’s unlikely. The 6% dividend buffers the share price but Telstra is not a short term stock by any means. Its huge market capital makes growth in smaller time frames harder but not impossible. Perhaps this is one stock you could buy now and forget for 10 years – at worst, you should wake up with a pile of dividends plus franking credits.

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Motley Fool contributor Owen Raszkiewicz does not own shares in any of the companies mentioned in this article. 

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