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Is Telstra Corporation Ltd still a BUY at over $5.25?

Shares of telecommunications giant, Telstra Corporation Ltd (ASX: TLS) have had a fantastic run in the past three years – rising 77% not including dividends. That’s a huge gain by anyone’s measure, especially once you consider it is one of Australia’s biggest companies.

But now, with shares approaching their 10-year high of $5.40 (which was achieved on May 18, 2005), the question has to be asked if Telstra is still worthy of investors’ money? In short, this Fool (capital ‘F’) believes the answer is yes.

However Telstra isn’t going to jump 10% overnight nor is it likely to grow at the same pace in coming years as it has in the recent past. So what investors have to do is approach it with a long-term mindset.

Benefits of a long-term investment

Focusing on the long-term allows us to take advantage of those juicy fully franked dividends and forget about daily price movements of a stock. After all, it’s about time in the market not timing the market which is important to our success.

In coming years, Telstra shareholders will be able to capitalise on the telco’s transition to a more agile company. As management continue to sign-off on divestments and involve themselves in exciting new growth areas, shareholders will reap the rewards of holding a company with scale and a reputation for success.

Thanks to its huge margins and dominance in the Australian mobile and fixed internet markets, Telstra has been able to pay a higher dividend than its competitors and build upon its mountain of free cash. The latter will likely be used to fund further investments in Asia.

It’s easy to see why management are likely to continue their push overseas. Both the Network Application Services (NAS) and International divisions are continuing to kick goals for management and in the most recent half year, each grew revenues by nearly 30%.

Another great alternative…

Shares in Telstra and its competitors such as TPG Telecom Ltd (ASX: TPM) and Amcom Telecommunications Limited (ASX: AMM) continue to push to new highs. But that hasn’t stopped us here at the Motley Fool Australia from finding other CHEAP growth stocks with fantastic dividend yields!

For example, Top Motley Fool analysts just identified their #1 ASX pick for 2014, a small-cap stock that could be poised for big gains (and offers a fat, fully franked dividend!). Discover all the details now, including the name and code, in this FREE investment report, "The Motley Fool's Top Stock for 2014."

Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies. 

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