The past six months has seen a general sell-off in stocks not just in Australia but also across the globe. The S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is down 11.4% and even blue-chip Telstra Corporation Ltd (ASX: TLS) has experienced a 10.3% decline.
The negative numbers above have sunk even lower on Monday morning with the index following Wall Street's negative lead from Friday to be down nearly 2.5% by mid-morning. Even the defensive blue-chip telco Telstra isn't being spared with the share price down over 2% to just $5.54.
The fall in Telstra's share price could make now a great time for long-term investors to pick up a high quality, defensive blue-chip business at a reasonable price – certainly the pricing is more tempting than it was last Friday!
So is now a good time to buy? Here are Telstra's results for the 12 months ending June 30:
- Revenue increased 2.9% to $25.8 billion
- Net profit after tax slipped 1% to $4.2 billion
- Earnings per share increased 0.3% to 34.5 cents per share (cps)
Looking forward, the mobile division remains a solid growth driver with the division now accounting for 41% of the total sales – new mobile client subscribers rose by almost 300,000.
The network application and services division which targets government and corporate customers was the fastest growing division, recording a 23.2% jump in revenues to $2.4 billion.
The Foxtel division also grew however the business is expected to face increased competition from new entrant Netflix. Meanwhile, Telstra's broadband business could face increased headwinds as the NBN continues its roll-out and from a reinvigorated and beefed-up TPG Telecom Ltd (ASX: TPM).
Guidance was for a low single digit growth in underlying profit which suggests at today's prices the stock is trading on a FY 2016 price-to-earnings ratio of 15.6 times.
Dividend Yield grows
Perhaps of greatest importance for shareholders in Telstra is the income stream the stock provides. Morningstar's data shows a forecast increase in the FY 2016 total dividend to 31.5 cps. With the share price down around 2% today that makes Telstra's fully franked dividend yield even more appealing today than it was last week with the implied yield increasing to 5.7%
