Why this broker loves the current Telstra (ASX:TLS) share price

What's not to love about the current Telstra share price?

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The Telstra Corporation Ltd (ASX: TLS) share price is having a pretty decent day so far this Tuesday, all things considered. Telstra shares are currently trading at $3.90 each, up 0.64% for the day so far. That stands in pretty stark contrast to the broader S&P/ASX 200 Index (ASX: XJO) today, which is currently down 0.05% so far to 7,244 points.

Telstra shares have been pipping the ASX 200 over some other metrics too. Over the year to date in 2021, Telstra shares are up a healthy 29.7% so far. Over the past 12 months, Telstra has managed an even more impressive 38%. In contrast, the ASX 200 has returned around 8.1% year to date so far. As well as 24.07% over the past 12 months.

Telstra beats out the ASX 200

Why all of this rather solid outperformance from the Telstra share price? Well, investors seem to have been impressed time and time again about what Telstra has had to say over the year so far.

Back in late June, Telstra surprised most of us with its announcement that it will be selling half (well, 49%) of its mobile towers infrastructure business to a consortium of investors, which included the Future Fund.

It was the price that Telstra was able to command for these assets – $2.8 billion or 28x earnings – that really got investors excited. The company has a lot more infrastructure assets that could be sold in the future, so this was clearly good news for the the telco.

Then, Telstra delivered its FY21 earnings report last month. This report once again reaffirmed Telstra's annual 16 cents per share dividend for FY21. It also announced a new $1.35 billion on-market share buyback scheme.

This also gave the Telstra share price a boost. As did Telstra's announcement just last week that it would be implementing a new cost-cutting program called 'T25'.

But that gets us to the current Telstra share price. So where to from here for this ASX 200 telco?

Could the Telstra share price be a buy today?

One broker who thinks it could be is investment bank, Goldman Sachs. Goldman currently rates Telstra shares as a 'buy' with a 12-month share price target of $4.40 a share. That implies a potential future upside of around 13.1% on current pricing. Goldman recently bumped up this price target to $4.40 earlier this month, from $4.30 previously.

The broker remains bullish on Telstra due to the additional new free cash flow the T25 program will unlock, which Goldman thinks will be allocated towards more share buybacks. Goldman also sees healthy dividend returns from Telstra shares going forward. As well as solid returns from the further "infrastructure monetisation over time".

At the current Telstra share price of $3.90, this company has a market capitalisation of $46.44 billion. It also has a price-to-earnings (P/E) ratio of 25 and a dividend yield of 4.1%.

Motley Fool contributor Sebastian Bowen owns shares of Telstra Corporation Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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