Should I Buy Telstra Shares Today?

What Happened to Telstra’s Share Price?

Shares in Australia’s biggest telecommunications provider, Telstra Corporation Ltd [ASX:TLS], skipped ahead today to outperform a robust Aussie stock market. Telstra closed up nearly 1% at $6.20. Telstra shares seem to have found a short-term bottom after two weeks of negative price action.

Why Did This Happen to TLS Shares?

Telstra is one of Australia’s largest companies that pays a consistent dividend. Investors in Telstra shares watch interest rate movements closely, because a lower cash rate makes Telstra’s relatively high dividend payments more attractive.

Today, NAB’s economics team downgraded its growth forecast for the Australian economy and said the chances are ‘rising’ of interest rate cuts to below 2%.

Investors seek refuge in high-yielding stocks like Telstra when it looks like rates could fall. That behaviour has driven a large part of Telstra’s share price performance for the past two years — and it added another six cents to the company’s share price today.

What Now for Telstra Corporation Ltd?

Telstra continues to dominate the telco industry and the Aussie share market. But it’s by no means a high-growth business.

The big attraction for investors in Telstra is its dividend yield. While its earnings may not grow sharply, the company has proven to be a solid dividend payer.

If you’re looking for strong dividend growth, this may not be the stock for you. But if you’re looking for a company with a reasonably strong balance sheet and the ability to keep paying out cash to shareholders, then Telstra is still worth a look.

Telstra is a perennial favourite for investors who seek the safety of reliable dividends. It could be a great stock for your portfolio. But if you’re seeking big potential rewards from exciting stocks that trade now for mere cents, go here to find out more.

Cheers, Tim Dohrmann
Small-Cap Analyst, Australian Small-Cap Investigator

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