There are two key reasons why investors may want to consider buying Telstra Corporation Ltd (ASX: TLS) shares.
Telstra is our country’s oldest telecommunications business, having built the first telegraph line in 1854. In 2019, it provides more than 17 million retail mobile services, around 5 million retail fixed voice services (e.g. home phones) and 3.6 million broadband services. Telstra also has operations in eHealth, network applications and subsea cabling. In 1997 (until 2006), the Government sold Telstra to Australian investors by listing the shares on the ASX. The second batch of Government share sales, called “T2”, was conducted in 1999 at $7.40 per share.
2 Reasons To Buy Telstra Shares
Telstra shareholders have been through a real rollercoaster over the past five years, it’s down by 30% in that time. However, since the start of 2019 the Telstra share price is up around 38%.
The fall in the share price has been due to the loss of Telstra’s important telecommunications infrastructure which was taken over by the NBN Co. Indeed, despite being paid for the network, the NBN is a core part of the reason that Telstra’s profit margins and net profit are falling.
However, there are a few good reasons to consider buying Telstra shares such as these two:
Telstra Dividends
Telstra has always been known as a dividend share, but despite the recent dividend cuts it may actually have turned a corner because it’s now trying to pay a sustainable dividend based on a dividend payout ratio of less than 100% of its earnings.
Some investors now feel that the dividend of 8 cents per share may be the bottom of the dividend cycle.
Based on the current share price, it has a fully franked dividend yield of 4.2%.
5G Technology
The future of phones look promising with 5G probably going to unlock a whole host of different technologies which we can’t even think of yet. The NBN could be one of the first to lose revenue to Telstra and others.
Other technologies are going to rely on ultra-fast data from 5G like automated vehicles, augmented reality and so on.
Is Telstra A Buy?
Although those two reasons are attractive, a share price should follow the earnings and I’m not sure if Telstra’s earnings have bottomed or whether it will be able to profit strongly from 5G.
It might be better to go for the reliable shares in the free report below instead.
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