The Telstra Corporation Ltd (ASX: TLS) share price was a disappointing performer again in 2020.
The telco giant's shares lost 15.1% of their value over the 12 months. This compares to a 1.4% decline by the benchmark S&P/ASX 200 Index (ASX: XJO).
Why did the Telstra share price underperform?
Investors were selling Telstra's shares last year amid concerns over the impact that the pandemic was having on its operations and ultimately its dividend.
In FY 2020, the company estimated that its underlying result included a net negative impact from COVID-19 of approximately $200 million. This relates to lower international roaming, financial support for customers, delays in NAS professional services contracts, and additional bad debt provisions.
And while this didn't stop Telstra from maintaining its 16 cents per share fully franked dividend in FY 2020, there are nagging fears that this might not be the case in FY 2021.
In light of this, the Telstra share price has fallen accordingly to reflect a potential dividend cut.
Is a dividend cut coming?
Judging by its share price performance, many in the market appear to believe a dividend cut is coming this year.
However, it is worth noting that most analysts are forecasting a 16 cents per share fully franked dividend for the foreseeable future.
This follows comments by the company in respect to its willingness to adjust its dividend policy appropriately to maintain this dividend, just as long as it isn't for a temporary fix.
What else happened in 2020?
In November Telstra announced an important milestone in its T22 strategy with the proposed restructuring of the company to create three separate legal entities.
Telstra's CEO, Andrew Penn, believes the restructure would enable the company to take advantage of potential monetisation opportunities for its infrastructure assets which could create additional value for shareholders.
Mr Penn commented: "The proposed restructure is one of the most significant in Telstra's history and the largest corporate change since privatisation. It will unlock value in the company, improve the returns from the company's assets and create further optionality for the future."
Is the Telstra share price weakness a buying opportunity?
This proposal went down well with analysts at Goldman Sachs. It reiterated its buy rating and $3.75 price target on its shares following the news.
The broker also reaffirmed its forecast for a 16 cents per share fully franked dividend in FY 2021 and beyond.
Goldman commented: "We believe the update from Telstra will be viewed positively, given: (1) it reflects a greater willingness to monetize its attractive infrastructure assets to create shareholder value; and (2) underlying earnings trends, particularly in mobile, which looks to be trending favorably, supporting the improved FY23 ROIC target."
"This supports our positive view on Telstra, which continues to be predicated on: (1) A positive mobile inflection approaching, which typically drives outperformance; (2) The 16cps dividend is a sustainable, and could be supplemented by meaningful TowerCo proceeds; and (3) Significant Infrastructure value, which could be crystallized over time as we head towards NBN privatization," it concluded.
