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Is now the time to buy Telstra Corporation Ltd shares?

I think it is fair to say that Telstra Corporation Ltd (ASX: TLS) has quickly become one of the most unloved shares on the Australian share market.

Concerns over NBN margins, a cut to its dividend, and a sizeable future earnings gap have all weighed heavily on investor sentiment during the last 12 months.

This recently led to the telco giant’s shares falling to a multi-year low of $3.06, a massive 32% lower than its 52-week high of $4.52.

Is now the time to buy Telstra’s shares?

I think that Telstra’s shares are very attractive at the current price, especially given the generous dividend yield that its shares provide at these levels.

Based on its fully franked 22 cents per share annual dividend, Telstra’s shares offer a market-beating 7.1% yield right now.

I expect this to lend some support to its shares and can’t imagine them being dragged much lower from here, all other things being equal.

In fact, the only thing that I think would take its shares lower from this level over the next few years would be another dividend cut.

But I feel confident that the 22 cents per share payout is sustainable over the next few years thanks to a potential write-down of the NBN by the Federal Government, the arrival of 5G internet, and the company’s cost cutting opportunities.

I’m not alone in thinking this way. A note out of Goldman Sachs a couple of month ago reveals that the broker remains positive on Telstra’s opportunity to reduce its inflated cost base through the digitalisation and simplification of its business.

Thanks partly to this, the broker has forecast Telstra to continue paying a 22 cents per share dividend until at least FY 2020.

Incidentally, the broker has a buy rating and $4.33 price target on its shares. Whereas it has a sell rating and $4.70 price target on TPG Telecom Ltd (ASX: TPM) shares and a neutral rating and $2.70 price target on the shares of Vocus Group Ltd (ASX: VOC).

I would agree with Goldman on these ratings and think investors ought to consider Telstra today.

But if you're not convinced that Telstra can maintain its dividend then this fast-growing dividend share might be a better option for you.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended 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 Scott Phillips.

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