Is it time to buy Telstra Corporation Ltd shares?

Source: Telstra presentation

Telstra Corporation Ltd (ASX: TLS) has already fallen 4.4% in 2016, after falling around 8% last year.

In fact, since its April 2015 high of around $6.67, Telstra has fallen around 20%. After such steep falls in this blue chip share, many investors will be questioning: “Should I buy Telstra shares?”


Telstra’s dividend is a key reason many Australian investors choose to own its shares. The company has one of the most reliable dividends of all blue-chip shares on the ASX, and it’s also fully franked. That means, Australian investors who hold for more than 45 days may be eligible to receive a tax credit come June 30, thus boosting the effect of the dividend.

Especially in our record-low interest rate environment, Telstra’s forecast 5.8% fully franked dividend will continue to appeal to many investors.


Despite being Australia’s largest telecommunications company, Telstra also boasts modest long-term growth potential. In Asia, the $65 billion telco is widening its reach to key infrastructure markets, while also increasing its investment spend on the next generation of profitable technologies like eHealth, Machine-to-Machine communication and wireless networking in local markets.


At $5.33 per share, the risk-reward trade-off has tilted more in buyers’ favour over recent months. Previously, I’ve said $5 could present a compelling entry point into the stock, and I stand by that. However, at today’s levels, Telstra is – arguably – already trading below fair value and could be worthy of closer inspection.

Foolish takeaway

A reliable blue-chip dividend share, growing modestly, yet trading below fair value presents a pretty compelling investment case for Telstra. However, it’s also important to regularly remind ourselves to exercise patience in the share market and wait for only the most compelling investments to present before committing our capital. For that reason, although I think investors could do worse than buy now, I’m waiting for a wider margin of safety on Telstra shares before hitting the buy button.

The Internet is About to Go "Six Feet Under"... And You CAN'T Afford to Miss What Comes Next

In-the-know investors are dancing on the Internet's grave--and gearing up to cash in on an even BIGGER tech industry. Australia--and the world--will NEVER be the same. Dollar for dollar, insiders are calling it one of the biggest new markets in the history of modern business... NOW is the time to get in on the hush-hush industry that could be poised for growth of over 4,463%+ by 2020... And the 1 ASX stock that stands to grow YOUR money right alongside it! Simply click here to learn its name.

Motley Fool writer/analyst Owen Raszkiewicz does not have a financial interest in any company mentioned. Owen welcomes your feedback on Google+, LinkedIn or you can follow him on Twitter @ASXinvest.

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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.