Is the Telstra Corporation Ltd (ASX: TLS) share price a buy after shedding nearly 10% of its value in the last week?
Telstra shares have not coped well with the general market sell-off we have seen this week. It was only last Thursday when we saw Telstra shares going for $3.82. A week before that, these shares would have set you back $3.92.
But today, you can pick some up for just $3.44. That’s a 9.95% drop in a week and a 12.2% drop over two.
Of course, Telstra did go ex-dividend yesterday for its 8 cents per share (cps) interim dividend (which is made up of a 5 cps ordinary dividend as well as a 3 cps ‘special’ dividend) – which wouldn’t have helped. Still, it’s a steep pullback for Australia’s largest telco.
Why are Telstra shares falling?
Well, apart from the ex-dividend factor, Telstra seems to be well and truly caught up in the general market sell-off that we’ve seen this week – which in turn seems to be strongly related to the ongoing spread of the dreadful coronavirus outbreak.
Before these fears were gripping the stock market, the Telstra share price was also influenced by a ‘ho-hum’ half-year earnings report as well as news that it seems likely to have a more consolidated, cashed-up rival in the betrothed TPG Telecom Ltd (ASX: TPM) and Vodafone. The Federal Court has given the go-ahead for the TPG-Vodafone merger after overruling objections from the ACCC.
Is the Telstra share price in the buy zone today?
It’s certainly more in the zone this week than last, to be sure. Today, Telstra is offering a defensive earnings base as well as a dividend that offers a fully franked, trailing yield of 4.64% (or 6.63% grossed-up).
Now I’m not detracting from the very serious issue of the coronavirus, but I do think that Telstra is a company that isn’t particularly vulnerable to the threats it poses.
Telstra is a telco after all, and one that primarily sells mobile phones, data plans and internet connections at that. I don’t envisage any scenario where its customers suddenly decide they don’t want internet or phone plans, no matter the impact of this virus. The company’s expansion plans (including 5G) remain on track and I’m bullish on Telstra’s future.
Therefore, I think Telstra could be presenting a buying opportunity today, especially for those investors who are searching for some decent dividend income in today’s market.
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As of 13/2/20
Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited. 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 Scott Phillips.