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3 big reasons to stay loyal to Telstra Corporation Ltd

While the S&P/ASX 200 (INDEXASX: XJO) has managed to edge slightly higher today despite a number of key stocks trading ex-dividend, Telstra Corporation Ltd (ASX: TLS) has also managed to continue its stellar run. For the day so far it has risen another 5 cents or 0.9% and is trading just below its 10-year high at $5.71.

The telecommunications giant has been a remarkable investment for shareholders recently. It is up 16.7% over the last 12 months and a remarkable 108% since the beginning of 2011.

Although the stock is becoming more and more expensive, here are three reasons it’s worth holding onto your Telstra shares…

1)  The Reserve Bank yesterday confirmed interest rates will stay at 2.5%. While that’s bad news for individuals with their cash stuck in term deposits, it’s great for Telstra shareholders who are being paid 29.5 cents per share annually, fully franked. Grossed up, that’s a juicy 7.4% dividend yield.

2)  Telstra boasts a sustainable competitive advantage as Australia’s largest (and arguably, its best) telecommunications provider. Not only does it maintain an enormous, and growing, customer base, but it also provides excellent customer service and high-quality connections.

3)  To expand on the above reason, Telstra is in the box seat to benefit from the latest technology trends including cloud computing and the “internet of things”. The latter will allow everyday devices to connect to the internet and require connectivity capabilities provided by the likes of Telstra.

An even better bet than Telstra

Granted, Telstra is no longer trading at a bargain price. While I wouldn’t necessarily be rushing out to buy or increase my stake in the company right now, if I owned it I’d certainly be sticking with it for the foreseeable future.

If it's Telstra's lucrative dividend that you're after, we may have an even better option for you to consider. This ultra-promising small-cap stock not only offers a fat, fully franked dividend yield but also fantastic growth prospects in the years ahead. So much so that our top analysts deemed it to be The Motley Fool's #1 dividend-paying stock for 2014-2015.

Put simply, this ASX stock could be a huge winner for your portfolio. To discover the name and code FREE, simply click here now.

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

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