Commonwealth Bank of Australia (ASX: CBA), BHP Billiton Limited (ASX: BHP) and Telstra Corporation Ltd (ASX: TLS) are three of Australia's largest and most widely-held stocks, and for good reason. They are all dominant in their respective industries, offer a bumper fully franked dividend yield and help to form a solid foundation for investors' portfolios.
With the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) sitting just below a multi-year high however, are these three stocks capable of helping drive it even higher? Here's what you need to know about Australia's most popular stocks.
Commonwealth Bank
There's a good reason Commonwealth Bank's shares have been so popular in recent years. While its fully franked dividend remains far more appealing than the returns from term deposits or government bonds, it is also on track to deliver an annual cash profit in excess of $8.5 billion when it reports in August. This result has been driven by low bad debt charges and an increase in activity in the mortgage market.
Although investors have every reason to be attracted to the stock's near-term possibilities, it is the long-term that is concerning. Trading just below its all-time high on a P/E ratio of 15.3 and a Price-Book ratio of 2.9, the bank's shares are excessively valued and are highly unlikely to outperform the market in the long run. Unfortunately, even its forecast 4.8% dividend yield isn't enough to warrant a 'Buy' today.
BHP Billiton
There is actually a lot to like about BHP Billiton's long-term prospects which make it an appealing stock today. While coal and potash form two of the company's primary focuses, demand for the two resources is expected to soar over the coming decades thanks to a rapidly increasing global population.
Although I like the stock as a long-term buy, I believe investors could probably buy at a better price than what is being offered today. I expect iron ore and coal could both fall further in price over the coming months which would likely see BHP's shares fall in value, giving investors a more attractive entry point. While I wouldn't be selling shares, I'd be inclined to wait it out as well, making the miner a 'Hold' in my opinion.
Telstra Corporation
Although investors should not expect to see the telco's shares double in price anytime soon, there is still every reason to suggest they can outperform the market over the coming years (or even the next decade). The company's superior customer service levels continue to attract customers from rival carriers while it should also continue benefiting from society's increased reliance on broadband services.
To make for an even more appealing case, the company has outlined its intentions to significantly boost revenue generated in Asian markets in the coming years which should help boost the share price. The stock yields a juicy 5.4% fully franked dividend and looks to be a solid 'Buy' today.
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