Watch out below! The Telstra Corporation Ltd (ASX: TLS) share price is down 18% in 12 months.
Indeed, despite Telstra shares often being perceived as a way to counter the current record-low interest rates, it seems the dividend appeal of Telstra shares isn't rubbing off on the market.
At $5.18 apiece, yesterday's closing price, Telstra shares trade on a forecast fully franked dividend yield of 6.1%. If we take into account those franking credits, which eligible shareholders will likely receive in their next tax return, the yield blows out to an impressive 8.7% — try getting that from the bank.
Still, it seems the lacklustre profit performance of Telstra is taking its toll on investor sentiment. That's despite the massive dividend and an average analyst price target on Telstra shares being $5.57, according to the Wall Street Journal. My personal price target is slightly more than average.
Foolish takeaway
Predicting short-term share price movements with 100% accuracy is impossible. Instead, investors should focus their attention on understanding Telstra's business and make an informed judgement over the future profitability of the business. Then, determine whether the reward from holding its shares is worth the risk.
