52-week high share prices often scare off investors in the incorrect belief that the stock price cannot possibly rise any higher. In fact investors should not pay much attention to historical share prices and remember that markets are forward looking with future prices only relative to current growth prospects.
Over time 52-week highs will often become 52-week lows as the best businesses continue to perform better and better. So let's take a look at some of those companies hitting new highs recently and consider where they may go from here.
Telstra Corporation Ltd (ASX: TLS) pleased the market last week by raising its final dividend to 15 cents per share to take the full year payout to 29.5 cents. If we assume it pays out at least 30 cents per share in the year ahead it will be yielding 5.38% or around 7.8% when grossed-up for the franking credits.
Moreover, the telco announced a $1 billion share buyback which is not insignificant given the current market cap around $70 billion. In a low cash rate environment Telstra remains primarily a yield story. However, it's becoming a growth story too with the strong revenue growth of its Network Application Services (technology) division and a superior mobile and internet network still adding customers.
The massive cash balance and free cash flows mean the latest dividend rise and share buyback may be just the beginning of some more shareholder friendly capital management policies. In my opinion Telstra remains a solid buy.
Slater & Gordon Limited (ASX: SGH) hit an all-time high of $5.79 last week as the market digested a positive full-year report and strong outlook across its Australian and UK operations. The lawyers' core business is personal injury claims, but it has plenty of opportunity to branch out into more general legal services.
History shows lawyers have a hard won money-making reputation and the Slater & Gordon growth story is based on developing brand strength, a good reputation and strong controls on costs. In my opinion these legal eagles remains a buy.
Northern Star Resources Ltd (ASX: NST) reached a 52-week high of $1.89 last week and has seen its shares lift 93% over the past year. While gold has been stuck in a very solid trading range of late any breakout to the upside on the back of a serious escalation in geopolitical tensions could see Northern Star's shares catch another updraught.
Gold remains one of the best hedges against inflation or economic downturns going, but smart investors will realise that owning the physical stuff won't pay you an income. However, these days holding your cash in a savings account won't pay you much of an income either! That's why it's worth knowing about the very best high-yield stocks available that are on good valuations.
