Caution: Telstra Corporation Ltd shareholders look out below!

Watch your step, Telstra Corporation Ltd (ASX:TLS) shares are down 18% in 12 months.

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Watch out below! The Telstra Corporation Ltd (ASX: TLS) share price is down 18% in 12 months.

Source: Google Finance
Source: Google Finance


Indeed, despite Telstra shares often being perceived as a way to counter the current record-low interest rates, it seems the dividend appeal of Telstra shares isn't rubbing off on the market.

At $5.18 apiece, yesterday's closing price, Telstra shares trade on a forecast fully franked dividend yield of 6.1%. If we take into account those franking credits, which eligible shareholders will likely receive in their next tax return, the yield blows out to an impressive 8.7% — try getting that from the bank.

Still, it seems the lacklustre profit performance of Telstra is taking its toll on investor sentiment. That's despite the massive dividend and an average analyst price target on Telstra shares being $5.57, according to the Wall Street Journal. My personal price target is slightly more than average.

Foolish takeaway

Predicting short-term share price movements with 100% accuracy is impossible. Instead, investors should focus their attention on understanding Telstra's business and make an informed judgement over the future profitability of the business. Then, determine whether the reward from holding its shares is worth the risk.   

Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned. Owen welcomes -- and encourages -- your feedback on Google+, LinkedIn 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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