Australia's best blue-chip stock

This stock has good dividends, single-digit growth and is king of a booming industry.

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Australia's top stocks are overvalued. The banks, retailers and miners are expensive. Especially if your investment timeframe is three to five years, the current share prices and record earnings by many of our favourite high-yielding S&P/ASX 20 (ASX: XTL) stocks is unlikely to be repeated.

Up until this past year, banks were being rewarded for their tight lending and Australians' ability to save. Banks, like much of Australia, were shielded from the rest of the world thanks to an insatiable demand for resources stemming from Asia, solid economic growth and strong interest rates. Our two biggest retailers have thrived thanks to low unemployment and rising wages.

Now interest rates are at their lowest point in many years and unemployment is expected to rise – putting pressure on all of our biggest stocks.

Australia's retail stores such as Myer (ASX: MYR) and David Jones (ASX: DJS) have struggled as consumer sentiment remains low but the RBA has stepped in and lowered interest rates in a bid to encourage people to spend in stores. The take-up has been slow and many investors wouldn't be willing to accept the risk of a medium-sized retail stock for their hard-earned cash.

There is one product which both Australian businesses and consumers have continued to use despite a potential slow-down in the economy. Internet bandwidth, particularly mobile device usage, has been booming. Man's best friend is now a mobile phone. It is now a non-discretionary expense, meaning if you're in business or interested in the 21st century social life you can't live without it.

In Australia, sitting atop the apex of the mobile phone, internet download and social media pyramid is Telstra (ASX: TLS). Despite being one of Australia's biggest businesses, it's growing. In the past year, unsurprisingly, Telstra's legacy businesses posted a reduction in profit but its up-and-coming services outperformed. It also added 1.3 million new mobile customers in Australia alone and grew its overseas presence in Asia. This was echoed with strong results.

Foolish takeaway

In its most recent full-year report, it announced a huge 12% increase in profit. Unlike Commonwealth Bank's (ASX: CBA) record result, Telstra's is more sustainable and, although it may not be as large in coming years, will remain sustainable. After going ex-dividend this week, the share price has dropped and could present a buying opportunity.

Every Aussie investor knows Telstra, but only the smart money is on the move now… Discover whether you should buy, sell or hold Telstra shares in our brand-new report, written by a top Motley Fool analyst. It's free, click here for your instant download!

More reading


Motley Fool contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies. 

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »