Are Telstra Corporation Ltd shares officially in a bear market?

The Telstra Corporation Ltd (ASX: TLS) share price has been punished, falling 23% over the past year.

TLS share price

Source: Google Finance

Telstra shares have fallen 23% over the past year, compared to the market, or S&P/ASX 200 (INDEX: ^AXJO) (ASX: XJO), which is up 9.5%!

Are Telstra shares in a bear market?

Generally, a market ‘crash’ is taken to be a fall in prices of 20% or more, before they bounce back. A ‘correction’ is a 10% fall.

However, rather than trying to determine if Telstra shares are in a ‘bear’ market, the more important question is…

Are Telstra shares good value?

Telstra shares are forecast to pay a dividend of 7% fully franked. That’s highly appealing to many investors, but especially income-seeking investors and those with a self-managed super fund (SMSF).

However, there is a difference between price and value, which all investors must pay attention to.

Despite Telstra shares falling steeply, I do not believe they are a bargain right now.

With TPG Telecom Ltd (ASX: TPM), Vocus Group Ltd (ASX: VOC) and dozens of other competitors on the NBN trying to snatch some of Telstra’s business, I think investors need to carefully consider the risks. Then, we should be patient and wait for a healthy gap between its share price and valuation – in spite of the dividend yield.

Foolish Takeaway

Telstra shares may be in a bear market and offering a big forecast dividend, but it is not yet a bargain investment. If its share price falls below $4, my interest will pick up once again.

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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned. You can follow him on Twitter @OwenRask.

The Motley Fool Australia owns shares of Telstra Limited, TPG Telecom Limited, and Vocus Communications Limited. 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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