All eyes are on telecommunications giant Telstra Corporation Ltd (ASX: TLS) this week after an eventful fortnight for the company, with its shares getting slammed to end off the trading week at a 52-week low on June 22 at $2.68. But Telstra has kicked off this week back in the black, with its shares up 1.3% to $2.71 at the time of writing, although it’s unlikely there will be clear waters ahead for the company as its substantial restructuring begins to play out. Investors were no doubt lamenting their holdings in the beaten down blue chip last week after its…
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All eyes are on telecommunications giant Telstra Corporation Ltd (ASX: TLS) this week after an eventful fortnight for the company, with its shares getting slammed to end off the trading week at a 52-week low on June 22 at $2.68.
But Telstra has kicked off this week back in the black, with its shares up 1.3% to $2.71 at the time of writing, although it’s unlikely there will be clear waters ahead for the company as its substantial restructuring begins to play out.
Investors were no doubt lamenting their holdings in the beaten down blue chip last week after its investor day tabled the largely unpopular 2022 strategy, with Citi predicting a Telstra dividend of about 10c per share by FY2021.
The Australian last week reported around one million Australians have a direct interest in Telstra, listing only two reasons why you’d stick with the stock; stock price growth and dividend income.
But if the latter looks unlikely to prove too fruitful, where to from here?
It remains to be seen how Telstra will fare in the looming 5G race, but it’s clear TPG Telecom Ltd (ASX: TPM) isn’t going to go down without a fight and might even have an unexpected trick or two up its sleeve to snag market share from the big gun.
Telstra’s investment in 5G is the backbone of its 2022 strategy, but as a strategy that includes slashing 8000 jobs and cutting $1 billion in costs, punters are understandably unsure about how all of this will play out, not just for shareholders, but for Telstra customers – a lot of whom are also shareholders.
The Australian Financial Review last week compared the strategic changes to those that occurred in Australian airline stalwart Qantas Airways Limited (ASX: QAN) in 2014, when CEO Alan Joyce slashed 5000 jobs, cut costs by $2 billion and reduced capital expenditure – only to see Qantas shares rise, on average, 55% per annum since.
But it’s overly optimistic to expect the same from Telstra, especially given the competitive space in which it operates, and the fact its investors have felt pretty unloved for some time now due to its underperformance.
Other struggling blue chips right now include Ramsay Health Care Limited Fully Paid Ord. Shrs (ASX: RHC), which is sitting in multi-year low share price territory as peer Healthscope Ltd (ASX: HSO) trundles on in the peripheral, with both healthcare stocks facing the reality of disappointing trading updates.
But wait, doesn’t the buy on a low mentality apply to the likes of Telstra in its current downturn?
I'd be more inclined to avoid it until its future dividend outlook becomes clear and consider these top 3 ASX Blue Chips To Buy In 2018
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Motley Fool contributor Carin Pickworth owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited and TPG Telecom Limited. The Motley Fool Australia has recommended Ramsay Health Care 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.