Is the Telstra Corporation Ltd (ASX: TLS) share price a buy?
The Telstra share price is down 19% since 21 February 2020. That's much better than plenty of the other ASX blue chips.
Shares like Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ) and Macquarie Group Ltd (ASX: MQG) have seen their share prices fall much harder due to the coronavirus.
What's going on for the Telstra share price?
Earnings (and earnings expectations) have the biggest impact on the Telstra share price. Telecommunications is one of those industries that you'd expect to hold up quite well. The internet is very important for most people to entertain themselves or work during this period.
Telstra has already announced that it's bringing forward some of its capital expenditure to increase the capacity of its network and accelerating the roll out of 5G.
In terms of earnings Telstra is expecting to earn at the bottom end of its guidance range for both free cash flow and underlying earnings before interest, tax, depreciation and amortisation (EBITDA). As a reminder, Telstra said it expects underlying EBITDA to be in the range of $7.4 billion to $7.9 billion, whilst free cash flow after operating lease payments is expected to be $3.3 billion to $3.8 billion.
Telstra also said in the update several weeks ago that it's going to be at the bottom end of the range of $0 to $500 million for growth underlying EBITDA excluding the NBN headwinds.
Whilst Telstra clearly isn't forecasting strong growth, it's still going to be earning billions of dollars in FY20.
What about the Telstra dividend?
It's hard to say what Telstra will do with the dividend. It should be able to support the ongoing dividend but that doesn't mean that the Telco will considering how uncertain the circumstances are. If the dividend is maintained, at this Telstra share price it's a grossed-up yield of 7.5%.
Is it a buy?
Telstra has proven it's more defensive than other large cap ASX shares. But there are plenty of shares within the ASX 200 that I'd rather buy first for growth and dividends.
