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Is it time to buy Telstra Corporation Ltd (ASX:TLS) shares?

One of the worst performers on the local market this year has been the Telstra Corporation Ltd (ASX: TLS) share price.

The telco giant’s shares are down over 23% since the start of the year due to concerns over the sustainability of its dividend in the face of heightened competition in the mobile and broadband markets.

Is it time to buy Telstra shares?

While an investment in Telstra is certainly not the low risk option it used to be, I do see a lot of value in its shares at this level and believe the market has now priced in a future dividend cut.

On Thursday Telstra’s shares closed the day at just $2.79, which is just a fraction off an all-time low and below the price targets of many of the most bearish of analysts.

While analysts at Citi continue to have a lowly price target of $2.70 on its shares, one of its bearish peers has just lifted its price target from $2.80 to $3.00.

According to a note out of UBS, it has lifted its price target and upgraded Telstra to a buy rating. The broker has speculated that Telstra may look to bypass the NBN and embark on an aggressive push to grow its market share.

Compared to some of its fellow brokers, though, this note could still be considered quite bearish. After all, the likes of Morgans and Deutsche Bank still have the equivalent of buy ratings and price targets in the range of $3.90 to $3.99 on the company’s shares.

Which broker is correct?

That’s the million dollar question and impossible to know, unfortunately. But one thing that is known, is that at the current share price Telstra’s 22 cents per share dividend provides investors with a fully franked 7.9% yield in FY 2018.

I believe that this 22 cents per share dividend will be maintained in FY 2019 as well, after which a lot will depend on the success of its cost cutting plans and the impact of TPG Telecom Ltd (ASX: TPM) in the mobile space.

This strong yield and the fact that its shares appear to have already priced in a future dividend cut, makes Telstra an attractive option in my opinion.

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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 and TPG Telecom 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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