The Telstra Corporation Ltd (ASX: TLS) share price fell 5.3% in April. That follows a 10.44% drop for March the month prior.
Today's current share price of $3.04 is starting to feel like a long way from the $4 high watermark that we saw last year.
So is this giant telco in the buy zone this May? We've just heard from a couple of the big 4 banks regarding their dividends (or lack thereof), so could Telstra be the income investors' white knight?
Why are Telstra shares looking shaky?
Even though the S&P/ASX 200 Index (ASX: XJO) has recovered remarkably since the lows we saw in March, the Telstra share price hasn't followed suit. In fact, Telstra has fallen whilst the rest of the ASX 200 has rallied around 20%.
What's going on?
Well, I think the first thing to note is that Telstra has suspended the cost-cutting program it has been working on over the last few years – known as T22. T22 involved staffing cuts, the streamlining of Telstra's product range as well as various other cost-saving measures. Whilst I think it was the right thing to do to suspend this program, obviously that doesn't change the fact that Telstra's costs will be higher than they otherwise would be. In my view, this has been the major drag on the Telstra share price over the last few weeks.
Are Telstra shares a dividend buy today?
I think the current Telstra share price is compelling from a value perspective. Whilst the coronavirus has sadly damaged vast swathes of the Australian economy, I think Telstra's earnings will be sheltered from most of the fallout. That's because Telstra makes money by selling mobile data plans and fixed-line internet – services that would be seeing unprecedented demand right now as everyone is staying home.
We might even see some customers upgrade their phone plans or internet so they can cram in even more binge-watching on Netflix.
Now Telstra's dividend has been a controversial topic in the past, but I think it's fairly safe at its current level, despite the economic turmoil impacting the markets in recent times. On current prices, you are being offered a trailing yield of 5.28% based on Telstra's 5 cents per share interim and final dividends last year, as well as the 3 cents per share 'special' dividend from its nbn payments.
If you include the value of full franking, this yield rises to 7.54% grossed-up.
As such, I think Telstra is a good option to consider for dividend investors today at its current share price, especially in light of what the ASX banks have just announced!
