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Woolworths Limited, Telstra Corporation Ltd and Westpac Banking Corp: Is it time to buy?

Shares in the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) have slid 2.5% over the past month with the Australian Dollar (AUD) remaining volatile, as mixed economic data confounds pundits.

Surprisingly, despite the overwhelming consensus for lower interest rates, shares of prominent dividend-paying stocks have taken a tumble in the past 30 days.

For example Telstra Corporation Ltd (ASX: TLS) is down 2.2%.

Woolworths Limited (ASX: WOW) is nearly 3% lower.

Whilst Westpac Banking Corp (ASX: WBC) has dropped almost 4%.

Right now, investors should be asking themselves if they’re missing a bargain buying opportunity.

Let’s take a brief look at each.

  1. Telstra has fallen although no significant company-specific news has been released from the $76 billion telecommunications giant. However, despite targeting growth in Asia, management expect profit growth in the low-single digits in the 2015 financial year. For a company trading at a price-earnings (PE) ratio of 18 times, it seems investors may in fact be pricing the stock off its dividend yield. Personally, I’m waiting for a meaningful pullback in share price before hitting the buy button on Telstra.
  2. Shares of supermarket giant Woolworths are down over 25% in the past year. Whilst the company continues to forecast respectable profit growth in the near future, my guess is the selloff has been fuelled by investors’ concerns over its loss-making Masters home improvement business and increasing competition from both domestic and foreign supermarket chains. However these concerns may have been overdone. Indeed investors choosing to buy Woolies shares at these prices will not only enjoy the relative safety of holding a blue-chip stock, but are forecast to receive a fully franked dividend equivalent to a yield of 4.9%.
  3. Unlike Woolies, Westpac has risen strongly in the past 12 months, along with its big bank counterparts. Since almost going bust in 1991 the banking giant has enjoyed over two decades of economic and property price growth, raising dividends and earnings per share along the way. Looking ahead however the near-term forecasts for unemployment and growth don’t appear quite so bright. Further, given the cyclicality of bank profits, their current valuations don’t appear to reflect the economic realities. Therefore, I’d avoid buying Westpac shares for the time being.

Should you buy Woolworths shares?

Both Telstra and Westpac are too expensive to justify a buy rating at today’s prices, in my opinion. On the other hand, Woolworths shares appear good value for investors looking for relative safety, modest growth and income potential.

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Motley Fool contributor Owen Raskiewicz owns shares of Woolworths Limited. Owen welcomes your feedback on Google plus (see below) or you can follow him on Twitter @ASXinvest.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.