3 reasons why the Telstra share price is rising today

Source: Telstra presentation

The Telstra Corporation Ltd (ASX: TLS) share price has gained more than 2% today to trade at $5.60, despite the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) rising just 1.1% in afternoon trading.

That’s despite massive plunges on US and European markets overnight, and oil prices falling to 12-year lows. Telstra’s share price is also well off its 52-week high of $6.74 from February 2015.

Here are three reasons why the share price of Australia’s largest telco is rising…

  1. Dividend yield. With global markets in turmoil, investors are likely looking to focus on those quality, defensive companies paying solid dividend yields. And Telstra’s dividend is nothing but solid – currently yielding 5.6% fully franked – which grosses up to 7.9%. Telstra will announce its half-yearly dividend in about a month’s time.

    Telstra dividend

    Source: CapitalIQ, Commsec

  2. Safety. Given its utility-like nature, after all, almost everyone needs access to the internet and almost everyone has a smartphone, Telstra’s share become in demand because even in a downturn, people will still pay for the company’s products and services. It’s unlikely that falls on global markets and our own ASX 200 will have much of a major impact on Telstra’s financial results.
    Investors are therefore unlikely to see massive price falls or huge cuts to that lovely dividend.
  3. More diversified than many think. Most investors see Telstra as the mobile phone network giant, but that’s not the only place that Telstra makes money from. What you may not know is that Telstra has invested significant amounts of capital in e-health services. Want to book appointments online, see a doctor via Skype, or give your doctor complete online access to your entire medical history? Well, Telstra has plans on becoming Australia’s largest e-healthcare provider with $1 billion in revenues in a few short years.
    Telstra also owns 54.3% of China’s largest online car website, Autohome, and will clearly benefit from the country’s rising middle class.
    Add in its close ties to work on the National Broadband Network (NBN), international business, a half share of pay TV provider Foxtel, Network application services, broadband and other fixed line businesses, plus its own Venture Capital arm (which recently bought into US app delivery services provider Instart Logic – to add to a multitude of recent investments in tech companies), and Telstra has many opportunities to grow.

Foolish takeaway

The giant blue chip is unlikely to set any records in earnings growth given its size, but that doesn’t mean it’s not a worthwhile investment, particularly for income-hungry investors.

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Motley Fool writer/analyst Mike King owns shares in Telstra Corporation. You can follow Mike on Twitter @TMFKinga

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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