What Happened to Telstra’s Share Price?
Shares in Australia’s biggest telecommunications provider, Telstra Corporation Ltd [ASX:TLS], lagged Friday’s buoyant Aussie stock market to close down by nearly 1.4%. The past few days have seen Telstra give up the last of its year-to-date capital gains — leaving Telstra investors in negative territory for 2015.
Why Did This Happen to TLS Shares?
Telstra is in talks to become a joint venture partner in a mobile provider with the biggest company in the Philippines, San Miguel Corporation [PSE:SMC].
The deal could be worth hundreds of millions of dollars. Telstra confirmed on Friday that the talks were taking place, but that there was no certainty of success.
Investors seem concerned that the telco giant could overpay to enter the potentially lucrative Philippine market. That seems to explain Friday’s drop in the TLS share price.
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. That’s why Telstra is keen to boost growth by expanding into the densely populated Philippines.
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.
Businesses of Telstra’s quality tend not to get knocked down too far when markets are tanking.
That’s why stocks with real assets like Telstra featured so prominently at June’s ‘House of Cards’ investment conference. Click here for access to my stock recommendations from the event.
And for deeper analysis on the Aussie stock market and global economy, keep an eye out for my essays in Money Morning — Australia’s biggest free daily financial e-letter.
Cheers, Tim Dohrmann
Editor, Money Morning