Regular readers will know I'm not a fan of Telstra Corporation Ltd (ASX: TLS) shares.
Its fixed line business is in terminal decline. Its competitive advantage in the mobile space — coverage — is eroding as Optus and Vodafone erect more towers, and Telstra have more outages. And the broadband market is incredibly competitive, with companies like TPG Telecom Ltd (ASX: TPM) gobbling up market share.
So it was no surprise to me this morning when Telstra reported a fall in both revenue and profit, and downgraded its forecast for the year ahead.
Telstra's interim dividend — to be paid to shareholders on March 31st 2017 — was maintained at 15.5 cents, but even that wasn't enough to stop the Telstra share price slumping over 4% to $4.95.
Like many Australian investors, I own Telstra shares. Still. In this low interest rate environment, the fully franked dividend has been just too good for me to pass up.
On a pure yield basis, now the Telstra share price has fallen back to below $5, they offer a 6.2% fully franked dividend yield, which grosses up to almost 9%.
Fantastic.
The only problem, of course, is what you make in the dividend, you're losing on the capital. The Telstra share price has fallen almost 8% in the past 12 months.
I should sell. I probably will. Maybe after I receive the interim dividend, at which time there might be a rush to get out the door. Luckily, courtesy of the share price appreciation of other holdings in my portfolio, my Telstra shares are now only a small part of my portfolio.
Speaking of share price appreciation, thank goodness for Commonwealth Bank of Australia (ASX: CBA). Its share price has jumped over 16% higher since this time last year.
The Australian love affair with big four bank stocks shows no sign of ending.
Forget the sky high house prices. Forget the brakes being slammed on property investors, with the government flagging just today they may consider a change to capital gains tax concessions.
Forget that offshore funding costs are increasing. Forget the incredibly competitive environment for the banks.
Forget that CBA only increased its fully franked interim dividend by just one cent, or 0.5%, and on an earnings per share basis, it grew by 0%. And forget that CBA shares are expensive, trading on a P/E of 15 times earnings.
Instead, celebrate CBA's 5% fully franked dividend yield.
And if respected pundit Richard Coppleson at Bell Potter is right, there could be more celebrations ahead.
As reported in the AFR, he says the S&P/ASX 200 Index will end the year at 6,300.
And because the performance of the top 20 ASX stocks accounts for around 65% of the S&P/ASX 200 Index, the only way it can get to 6,300 is through the big banks and mining stocks.
Anything's possible. Momentum can go along way.
If the CBA share price can trade at $85, it can get to $95.
The new mining boom might have further to run, propelling the share prices of BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) higher and higher.
It's a bull market. Jump on board. Enjoy the ride.
