Shares in Telstra Corporation Ltd (ASX: TLS) have outperformed Australia's S&P/ASX200 Index (ASX: XJO) (NDEX: ^AXJO) for each of the past three financial years and returned a huge 84 cents in fully franked dividends. Combined, that represents a return of nearly 100% in just three years!
However now that its shares trade consistently over $5.20, a price range not seen since 2001 – 2002, there are some who believe it's fully valued. I disagree.
For investors focused on the long term, I believe it'll make a suitable investment for both income and modest but sustainable capital gains. Thanks to rising revenues in its Network Applications Services (NAS) division and a move away from outdated businesses such as Sensis and fixed line wholesale services, Telstra is positioning itself as a more agile telecommunications company. What's more its dominance in mobile markets and bundled services (to name a few) will continue to provide excellent cash flows which will be used for dividend distributions and funding its Asian expansion.
Expected to pay a 5.5% dividend fully franked in the coming year, Telstra presents itself as a viable long-term alternative to low interest rates.
ONE ASX stock has a 7% dividend yield!
