The share price of Telstra Corporation Ltd (ASX: TLS) dropped 1.7% towards a 52-week low today as the release of strong Australian jobs data suggests the yield hunt may ease up quickly if the RBA is finished in its rate cutting cycle. The fact that largish volumes of the stock were traded suggests institutions may also be reaching the same conclusion.
Telstra shares are prized for their fully franked yield with its growth outlook only moderate at best due to its scale and the coming of the end for some of its old world operations like fixed-line telephones. At its current price of $5.22 it sells for around 15x analysts' estimates for forward earnings per share, which is relatively high for a low-growth business.
For investors in high-yielding blue chips the real question to consider is what the outlook is for cash rates in 2016, with today's positive jobs data meaning money markets are now increasingly inclined to think the RBA's next move may be to lift cash rates in the second half of 2016.
Anyone in agreement may want to consider whether today's strong jobs data marks the day the yield chase ran out of gas with the high-yielding banks also down today.
Commonwealth Bank of Australia (ASX: CBA) is down 1.6%, National Australia Bank Ltd. (ASX: NAB) is down 1.9%, Australia and New Zealand Banking Group (ASX: ANZ) is down 1.1%, and Westpac Banking Corp (ASX: WBC) is down 2.2%.
They say in investing it is better to be six months too early than six minutes too late and anyone holding a significant proportion of high-yield blue chips in their portfolio may want to think about trimming their holdings.
