How To Buy Telstra Shares
Telstra #Telstra
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As the country’s largest and most long-standing telco provider, Telstra is a household name. The company holds more than 40% of the mobile phone market share, ahead of key competitors Optus and Vodaphone.
It’s a clear-cut quality stock due to its size and longevity, market dominance, solid earnings and dividends, and track record of good governance and adaptation to changing economic conditions and consumer demand.
But being a household name doesn’t automatically make a company’s shares good value or a safe bet when it comes to generating wealth as an investor. There are mixed views of Telstra as a stock worth holding in your investment portfolio.
Here’s what you need to know about Telstra shares and how to buy and sell the stock in Australia.
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Telstra Share Price History
Initially listed on the Australian Securities Exchange (ASX) in 1997 with the ticker symbol TLS, Telstra is now one of Australia’s top 20 largest companies with a market capitalisation of more than $43 billion.
At the time of its float back in the late 90s, the share price was around the $2.60-$2.70 mark. At their height in 1999, Telstra shares were valued at over $9 a share, with numerous fluctuations in value since then, before steadying at around the $4 per share mark in recent years.
The company almost doubled in size in the five-year period from 2010 onwards, largely attributed to the leadership of then-CEO David Thodey. While the Telstra share price under Thodey doubled, peaking at $6.50, it slumped again the subsequent years.
An unfavourable National Broadband Network (NBN) deal reduced the telco’s profits and caused the company to cut annual dividends in 2017 from 31c per share to 22c. Weaker earnings saw dividends slashed again in 2020 to 16c and also caused a temporary dip in Telstra’s share value.
With the NBN rollout largely complete and Covid disruptions easing, some analysts feel the telecommunications industry is rebounding and a major player like Telstra could offer good value for investors going forward.
In financial year 2023, Telstra reported earnings of $7.9 billion, a 16% increase in earnings per share (EPS) and that it was on track to deliver a compound annual growth rate (CAGR) in the mid-single digit vicinity (~5%) out to FY25. Its total dividend for FY23 was 17c per share.
How Much Are Telstra Shares Worth Today?
Year-to-date, the Telstra share price has declined by around 3% with a current market value of around $3.8 per share. It’s lower than it was this time last year, and lower than its price 10 years ago.
Telstra’s price-to-earnings (P/E) ratio is 22.8. As a basic guide to a stock’s value, Telstra’s P/E ratio indicates each share’s market value is 22.8x what an investor would currently earn from each share. Comparatively, TPG Telecom’s P/E ratio is 24.8 (TPG is Vodaphone’s parent company).
Broker Morgan Stanley suggested Telstra was a stock to ‘buy’ in May this year, a recommendation it switched to ‘hold’ in August following the telco’s release of its FY23 results. The main reason for the downgrade was Telstra’s reversal on plans to sell part of InfraCo—its arm that delivers physical telecommunications infrastructure for businesses and industry.
Unimpressed investors led to a sell-off in August and Telstra’s share value dropped by more than 6% at one point. It has tracked at below the $4 mark since, rising slightly after the company’s AGM in October.
In addition to Telstra’s own profitability and ability to entice customers, its prospects (and market value) hinge heavily on factors including government telecommunications policies, technological innovation, and competitor performance.
Do Telstra Shares Pay Dividends?
Telstra is a well-known dividend-paying stock, with dividends paid out twice a year. Telstra dividends are fully franked, which can provide tax benefits.
Growing its dividends to return profits to shareholders is also a clearly-stated goal of the company, which makes it appealing to investors seeking reliable passive income without significant risk—given that Telstra is a stable, market-leading company.
However, TLS is by no means the only dividend-paying stock available on the ASX. Telstra critics also argue that the size of its dividend doesn’t justify the insubstantial capital growth in the TLS share price over time.
How To Buy Telstra Shares: Step by Step
Most everyday Australians begin investing by purchasing ASX-listed shares, and high-profile, large-cap stocks like TLS are generally well-regarded. For example, recent research into the Australian shares most popular with people managing their own super ranks Telstra in seventh spot after the big four banks and two miners.
You can buy Telstra shares through any participating ASX stockbroker. Investment and wealth management firms are examples of full-service stockbrokers—people generally pay a premium to access these services when they want expert advice on how to invest as well as support to execute trades.
A cheaper and more accessible option is using one of the many online share trading platforms/apps that are available to Australians. Prioritise a platform that offers access to the ASX, is regulated by ASIC, has reasonable and transparent fees, and is user-friendly. Then follow these steps:
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How To Sell Telstra Shares
You sell shares to either make money, or avoid large losses. Let’s say Telstra shares show signs of an enduring decline due to poor business decisions or the innovation of a rival—you might sell at a loss, and instead invest in a stock that represents a better opportunity for gains.
To take profits you could also sell when Telstra’s share price is high and reinvest in the stock when prices dip again. The downside of this approach is increased transaction costs, plus having to stay abreast of price movements so you can time your trades.
Others who invest in quality stocks have a more ‘set and forget’ approach. But even if you plan to hold long-term, you may eventually have a need to cash in some or all of your Telstra stock to fund your financial goals—for instance, an overseas holiday.
In any case, it’s helpful to set guidelines in advance, so you’re clear about what would prompt you to sell. Perhaps you don’t want to own Telstra shares if the P/E ratio goes above 25.
Selling Telstra shares is achieved the same way you purchase them: through a stockbroker. If you’re using an online brokerage platform, you’ll need to:
Shareholders without a broker that hold issuer sponsored shares, represented by a security reference number (SRN), can sell via Telstra’s share registry provider Link Market Services.
Frequently Asked Questions (FAQs) Is it a good time to sell Telstra shares?
The decision to sell Telstra shares could be triggered by a changed view of the stock’s growth prospects or because you prefer or need cash in hand. Analysts have mixed views on whether Telstra shares are good value or a stock to sell, so it’s important that you do your own research and carefully weigh up why you’d want to invest in, or divest from, Telstra. If you’re not confident in making a decision independently, you may wish to talk to a professional financial advisor.
What is the dividend paid by Telstra?
The amount of Telstra’s dividend fluctuates year-to-year depending on the company’s profitability. In the financial year 2023, its total dividend was 17c per share. Telstra provides shareholders with fully franked dividends paid out twice yearly.
What is the highest Telstra shares have ever been?
In 1999, two years after it was partially privatised and listed on the ASX, Telstra’s shares peaked at over $9 per share. Another notable lift in its share price occurred in 2015 when the stock traded around the $6-6.50 range.