Is it time to buy Telstra Corporation Ltd and Transurban Group?

Should you add these 2 stocks to your portfolio? Telstra Corporation Ltd (ASX:TLS) and Transurban Group (ASX:TCL).

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With interest rates standing at just 2%, stocks paying relatively generous yields have become increasingly popular in recent years. As such, the likes of Telstra Corporation Ltd (ASX: TLS) and Transurban Group (ASX: TCL) have seen their share prices rise by 91% and 96% respectively in the last five years as a struggling economy has forced the RBA to become increasingly dovish as it seeks to reinvigorate the macroeconomic outlook.

Now, though, high-yield stocks such as Telstra and Transurban (which currently yield 5.9% and 4.2% respectively) could see their share prices come under a degree of pressure. That's because GDP growth numbers not only beat expectations for the September quarter, but also indicate that the economy is growing at an impressive rate. Furthermore, with consumer confidence rising by almost 4% last month, the era of falling interest rates could be coming to an end.

While this may be true, that does not necessarily mean that Telstra and Transurban (and their high-yield peers) are worth avoiding. In the case of Telstra, it is forecast to increase its bottom line by 14% in the 2017 financial year and, with it trading on a price to earnings (P/E) ratio of 15.1 versus 15.3 for the ASX, its shares could deliver an index-beating performance after their decline of 7% in the last three months.

Looking further ahead, Telstra is pivoting towards faster growing Asian markets and is aiming to generate at least a third of its revenue from Asia within the next five years. This, plus new opportunities within the e-healthcare space as well as a dominant position within the domestic mobile market (which could benefit from improved consumer confidence) mean that Telstra's earnings growth profile is relatively bright. And, with it having a beta of just 0.5, it offers a relatively less volatile shareholder experience should the economy experience further challenges in 2016.

Similarly, Transurban is expected to increase its earnings by 11% in the 2017 financial year and, with it posting a rise in net profit of 15.5% per annum during the last decade, it remains a relatively dependable growth stock. Part of the reason for this is a bright medium to long term future, with a number of development projects set to come onstream in the US and domestically, such as the Citylink Tulla widening project in Victoria which is due to open in 2018 and the recently announced extension to the 95 Express Lanes in Virginia.

As well as new projects, there is also scope for pricing improvements to existing projects. For example, the 95 Express Lanes have only recently opened and there is the potential for increased prices – especially as the US economic outlook continues to improve. And, with cost savings still on the horizon, Transurban's margins could widen over the medium term. As with Telstra, Transurban could reduce portfolio volatility via a beta of 0.9 which, if the ASX remains volatile, could prove to be a useful ally.

Motley Fool contributor Peter Stephens has no position in any stocks mentioned. 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.

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