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Does 5G’s potential make the Telstra share price a long-term buy?

Is the Telstra Corporation Ltd (ASX: TLS) share price a good long-term buy today?

TLS shares are indeed having a strong day – up 1.13% at the time of writing to $3.12. However, Telstra shareholders are still significantly underwater so far in 2020  and a long way from the near-$4 levels we were seeing in January and February.

So does this mean it’s a good time to jump into Telstra? Well, let’s take a look!

Why Telstra shares have dipped in 2020

Like most ASX shares, Telstra has not escaped from the ravages of the coronavirus unscathed. The company was forced to cut back on its T22 cost-cutting strategy earlier in the year, which was to involve job cuts. Whilst this is great news for Telstra’s employees and (in my opinion) the right thing to do, it will mean that the company won’t be as profitable in 2020 and 2021 as a result. This partly explains the depressed Telstra share price, in my view.

Nevertheless, Telstra has maintained the interim and special dividends that it paid in March at 8 cents per share and has given no indication that its final dividend (due to be paid in September) is under threat.

On current prices, that would give Telstra a dividend yield of 5.13%, or 7.33% grossed-up with full franking credits.

Are Telstra shares a long-term buy today?

As a dividend share alone, I think Telstra is worthy of consideration for a portfolio today. It is a very defensive company – we are all willing to pay for internet and phone services through thick and thin these days. In this era of ultra-low interest rates, I think a solid dividend adds a lot of value to this company.

Looking forward, I see a lot of value in the Telstra share price, too. The company is investing heavily in 5G technology which has the potential to overhaul the 4G tech that’s currently in use across all mobile devices. Applications for 5G range from the Internet of Things (IoT) to improved healthcare and ‘smart cities’.

As the country’s biggest telco with the most cash to throw around, I think Telstra stands to benefit most from the rollout of 5G and I think every Telstra shareholder should be excited about the potential of this new technology for the company.

Foolish takeaway

I think there’s a compelling case for a long-term buy with Telstra shares at current prices. Right now, Telstra is a solid dividend stock with a robust yield but there’s also the potential of the future 5G to look forward to. There’s hopeful upside without too much downside, a combination I like!

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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.