The Telstra Corporation Ltd (ASX: TLS) share price has outperformed the S&P/ASX 20 (Index: ^AXTL) (ASX: XTL) over the past one, five and 10 years.
Indeed, despite surging bank stock prices, two dominant supermarkets and a boom for Australia’s mining sector; Telstra’s stock price has returned more than 8x Australia’s top 20 companies in the past five years. But in light of its recent share price fall, are Telstra’s fortunes set to reverse?
Telstra’s share price decline coincided with the appointment of Andrew Penn as CEO. Under the leadership of David Thodey, Andy Penn was Telstra’s Chief Financial Officer (CFO) for more than three years. In my opinion, Mr Penn was a good choice to succeed Mr Thodey.
One of the reasons I think Mr Penn was a smart choice is his experience in Asian markets. His time as an executive at AXA made him a natural choice for a leadership role at Telstra in light of its ambition to grow the business abroad.
Under its previous CEO, Telstra set a goal of deriving one-third of group revenue from Asia by 2020. While it may sound ambitious, Telstra already holds significant interests in Asia, such as its stake in Autobarn Inc, China’s largest automotive listing site. It also has extensive data infrastructure networks and centres, which were boosted by its acquisition of Pacnet earlier this year.
Another characteristic of Telstra that reassures me of the company’s long-term future is its dominance of the local market, which provides a platform for it to leverage growth. Although the growth of TPG Telecom Ltd (ASX: TPM) and M2 Group Ltd (ASX: MTU) is worth monitoring closely, Telstra is streets ahead of its rivals in new growth areas such as eHealth, Networked Services and Mobile.
Finally, Telstra boasts one of the most reliable dividends on the ASX. Its current fully franked dividend yield is an impressive 5.6%. Its dividend yield should help keep Telstra’s shares buoyant throughout the market’s down times, especially with interest rates at a record-low 2%.
Buy, Hold or Sell?
Telstra shares currently trade at $5.51, down from $6.50 in August. Although I’ve said a good buy price for Telstra shares may present around $5, long-term investors could do worse than consider starting a position in Telstra shares today.
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Motley Fool contributor Owen Raszkiewicz has a financial interest in M2 Group.
Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. 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.