Is Telstra’s $5 Share Price Built to Last?
It’s so safe, it’s risky.
Telstra had results today. Share price is down a couple of percent. This is a stock that’s gone from $3.40 to $5 in the last year. It’s an income stock, yields about 5.6%, PE’s a little bit ritzy at 28 times. But the results…
If you’re an income investor, they’ve done exactly what you would hope – results in line with expectations. No surprises. They’ve announced a $1 billion share buyback, which helps support the share price.
The only issue with Telstra is that the share price has gone up – and it’s gone up for a very similar reason to CBA over the last year. People have bought stocks that are safe with decent yields. And when everybody crowds into a safe stock, it becomes more risky.
Telstra has become more risky. But this is not a volatile business. There’s nothing in the results to suggest any reason for income investors to sell. It’s not a growth stock. It’s not a trading stock. Income investors will also now hold on for the ex-dividend date.
So everyone’s a little bit trapped. Bottom line – results are okay. Very similar story to CBA. Probably a bit overvalued in the short term. Could easily drop in the short term. But longer term, this result ticks the boxes on expectations and shareholder demands: pay us a decent yield, and don’t surprise us.
Meanwhile, Henry is going to do a webinar round-up of the results season. If you want to have a look at that, click below.
Winners, Losers, and What’s Next
Henry Jennings cuts through the noise to bring you the results that could define the months ahead.