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Is it time to buy Telstra Corporation Ltd?

Would you buy Telstra Corporation Ltd (ASX: TLS) shares for growth?

What about dividends?

How about both?

Indeed, since May 2010 Telstra shares have soared more than 100% and investors have received an additional 50% in dividends.

Coinciding with a fall in official interest rates, Telstra shareholders have not only benefitted from increased demand for reliable dividend stocks but a reinvigorated brand, expansion into Asia and divestments of legacy assets.

However the impressive 150% shareholder return from Telstra over the past five years hasn’t been matched by significant growth in earnings per share or dividend increases, as the next graph shows…

Source: Telstra FY14 Annual Report

Source: Telstra FY14 Annual Report

Without growing profits to match its share price growth, Telstra’s valuation has simply stretched over time.

Now, this isn’t necessarily a bad thing. Especially if a company is expected to grow healthily in coming years, a richer valuation can be justified.

Essentially, it means investors are paying for expected growth. This only becomes a problem if said growth doesn’t eventuate.

Indeed, with shares in Telstra currently trading at 18x last year’s profits, shareholders are likely keying in some significant growth over the coming years.

However, I’d find it difficult to justify a purchase of Telstra stock at today’s prices given the likely growth which lays ahead.

For financial year 2015 Telstra itself forecast: “Low single-digit income and EBITDA growth.”

Buy, Hold or Sell?

Telstra is aiming to generate 30% of revenues from Asia by 2020 using its strong cash flows from local operations to invest in infrastructure projects across the region.

Whilst this, coupled with modest growth in the Mobiles and NAS divisions within the domestic telecommunications market, bodes well for further profit growth, my advice is for investors to hold off buying Telstra shares until we’re afforded a better buying opportunity.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of June 30th

Motley Fool contributor Owen Raskiewicz has no position in any stocks mentioned. 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.

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