Better buy: Telstra Corporation Ltd or Australia and New Zealand Banking Group?

With interest rates still stuck at 2.5%, inflation at 3% and the property market already expensive. Many Australian investors are likely looking towards the stock market as a suitable investment going forward.

With the S&P/ASX 200 (INDEXASX: XJO) falling around 6.5% since September 1, now could be a great time to buy in.

No doubt blue chip stocks with solid fully franked dividend yields will be at the top of investors’ shopping lists. And two of the best are Telstra Corporation Ltd (ASX: TLS) and Australia and New Zealand Banking Group (ASX: ANZ).

Telstra, our biggest telecommunications company, recently took its full year dividend to 29.5 cents per share, after net profit jumped 14.6% in FY14. Telstra shares have benefitted from falling interest rates in a big way. Not only has it created demand for its high-yielding shares, it’s also made its $16 billion of debt more manageable.

Looking ahead Telstra is targeting key growth markets like cloud computing, unified communications, machine-to-machine (M2M) networking and even Asia for growth. By 2020, CEO David Thodey recently said he would like the company to derive one third of revenues from Asian markets.

ANZ is also pursuing an ambitious growth strategy in Asia. The only difference is ANZ rolled out its plans in 2007, when CEO Mike Smith launched the ‘Super Regional Strategy’. The group hopes to derive between 25% and 30% of revenues from foreign markets by 2017. In the first half of 2014, APEA markets (Asia, the Pacific, Europe and Americas) produced 19% of cash profits.

Closer to home, ANZ is continuing its strong push in business banking and mortgages, hoping to snare some market share away from its two larger rivals. In the coming year, earnings and dividends per share are expected to jump strongly as a result of the bank’s overseas expansion.

Buy, hold or sell

Each company has a number of enticing characteristics, especially in the current low interest rate environment. However shares in both Telstra and ANZ don’t come cheap, so my advice would be keep them on your watchlist and wait for a lower entry point.

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

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