Is the Telstra Corporation Ltd share price a buy?

Credit: Telstra

The Telstra Corporation Ltd (ASX: TLS) share price is at a multi-year low after going ex-dividend.

The Australian telecommunications giant has not seen its share price this low since 2011.

The lower a share price of a business goes supposedly the better value it is. But, it’s hard to say if Telstra is good value today.

Reasons it’s a buy

It’s true to say that anyone who bought Telstra shares at $3.35 today has gotten a better price than anyone who has bought over the past five years.

Telstra is Australia’s leading mobile operator, which is a pretty good place to be. It’s particularly important because 5G could be about to change everything. Automated cars will heavily rely on 5G. The Internet of Things will rely on 5G. Lots of things will rely on 5G.

If Telstra remains the number one mobile player, with the best network, then it could be the clear winner from the technology change.

The future of Telstra being a decent stock relies on it being able to grow earnings, 5G could be exactly what Telstra needs.

Of course, it also has other segments like cable infrastructure, e-health and others but these aren’t hugely material to Telstra at this point.

Most people are attracted to the grossed-up dividend yield of 9.38%.

Reasons it’s not a buy

The NBN is hurting the company’s margins and this is only going to become a bigger part of Telstra’s revenue as time goes on.

Competition is also fierce in the mobile area with low-cost providers offering big data packages for cheap prices. Telstra either has to offer more data or reduce prices to keep market share.

Both problems might result in Telstra’s earnings dropping over the next few years and that could mean the share price and dividend may drop even further.

Foolish takeaway

Overall I can understand why some investors, particularly income-seeking ones, are interested in Telstra. It could be the best dividend idea in the biggest 10 on the ASX, but I think there are far better dividend ideas and growth ideas than Telstra at the current prices.

I believe this top dividend stock would make a much better income idea than Telstra.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra 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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