Telstra Corporation Ltd (ASX: TLS) and Woolworths Limited (ASX: WOW) are two of Australian investors' favourite dividend shares.
Indeed, the blue-chip companies boast Australia's most valuable brands and provide a valuable service to millions of Australians every day.
Over the past decade, strong competitive advantages have enabled both companies to remain relevant with the consumer and distribute fully-franked dividends to shareholders year-in-year-out.
Unfortunately, in 2015, shares of both companies have underperformed the market, or S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), considerably. So could this be an opportunity for savvy investors to scoop up cheap dividend-paying shares in two of Australia's most renowned companies, or is it time to avoid them?
Woolworths
The Woolworths' share price has come under significant selling pressure in 2015 as competitors continued to post meaningful profit growth while Woolworths' supermarkets business ground to a halt. Profit downgrades and a management reshuffle followed, and now shareholders are wondering if the worst is yet to come. Indeed, while Woolworths' shares look cheap at 14x times last year's profits, analysts are forecasting further falls over the next three years. Dividends could also fall.
Telstra
Arguably, Telstra has proven to be the ASX's best dividend payer over the past five years. However, despite a recent rise in its bi-annual distribution, Telstra's profit growth has been relatively muted. Indeed, the company's transition towards a more dynamic technology company focused on regional growth opportunities has been met with mixed reviews from analysts. Nonetheless, at $5.46, Telstra's share price is modestly below the consensus price targets of analysts surveyed by The Wall Street Journal.
Foolish takeaway
When you invest in the sharemarket, there's always more risk relative to term deposits and savings accounts. However, there is also more reward on offer for those who exercise patience, invest long term and conduct their due diligence.
In my opinion, neither Woolworths nor Telstra shares are a bargain buy at today's prices. However, if I had to pick one, it'd be Telstra.
