CBA, Telstra and Woolworths Limited: Should you buy today?

The three stocks are sitting at record highs, but are they still a buy?

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The S&P/ASX 200 Index’s (Index: ^AXJO) (ASX: XJO) performance over the last 24 months has been nothing short of incredible.

It has climbed an astonishing 36% (not including dividends) since June 2012, driven by some of Australia’s largest and most widely held stocks such as Commonwealth Bank of Australia (ASX: CBA), Telstra Corporation Ltd (ASX: TLS) and Woolworths Limited (ASX: WOW).

With these three stocks sitting near record or multi-year highs, can the strong performances continue? Here’s what you need to know about Australia’s most popular stocks.

Commonwealth Bank of Australia

Commonwealth Bank’s rally over the last two years has seen it become, by far, Australia’s largest corporation by market capitalisation ($131.6 billion). The bank looks a certainty to record an annual cash profit in excess of $8.5 billion when it reports in August, driven largely by the low interest rate environment and the accompanying low bad debt charges.

Currently priced at $80.95, the bank’s shares are trading on an excessive P/E ratio of 15.3, which is well above its 10-year average. While the bank’s incredible performance could certainly continue in the short term, it appears the success is already well and truly priced into the shares, leaving little upside potential for investors. Not even its 4.7% fully franked dividend yield make it attractive at today’s price.

Telstra Corporation Ltd

Telstra has also rallied strongly in recent years. Although it’s been a bit of a bumpy ride so far in 2014, the stock has still managed to set a fresh eight-year high and looks set to climb higher in the long term.

Unlike Commonwealth Bank however, there are still plenty of reasons to like the telecommunications behemoth. Aside from its bumper 5.4% fully franked dividend, Telstra has the potential to grow earnings substantially in Asia while it has also made a number of strategic divestments which will free up an enormous amount of cash by the end of the year. Telstra would be an excellent addition to any portfolio at today’s price of $5.30 per share.

Woolworths Limited

Although I don’t think now is the time to be buying Woolworths’ shares, I think investors should hold onto the shares they already own. While the majority of the company’s growth is already behind it, the business looks set to maintain its dominant position in Australia’s retail industry over the coming decades while also growing its fully franked dividends. Forecast to rise to 139 cents per share in FY 2014, that’s a dividend yield of 3.8%.

An even better investment opportunity…

Out of the three companies mentioned, it’s clear that I’m most bullish on Telstra as it offers a bumper dividend yield and is a safer bet for your hard earned investment dollars. However, there is another stock I am even more bullish on! Aside from offering a better dividend and more solid growth prospects, the market hasn’t caught onto its incredible potential yet!

Wondering where you should invest $1,000 right now?

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Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

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