Woolworths Limited (ASX: WOW) shares and Telstra Corporation Ltd (ASX: TLS) shares offer big dividends, but is that enough?
Telstra
Telstra shares are forecast to pay yearly dividends over 7%. Together with its full franking, it is a grossed up payment of more than 10% for eligible Australian shareholders.
Many investors, especially Australian residents and self-managed super funds (SMSFs), would be very happy with that dividend even if the share price does not grow.
However, as I have shown before, the key risk of buying a slow – or no – growth company is that you overpay for the investment.
I would like to see a lower price before buying Telstra shares.
Woolworths
Woolies shareholders have experienced a tumultuous ride over the past five years, with its share price falling from $38 to under $21 and back to $26. Over the period, it has closed its Master home improvement business and cut a chunk out of its dividend.
Woolies shares now yield a forecast 3.1% dividend, fully franked. That is impressive. But the company has work to do on its supermarkets business with the likes of Aldi, Coles and online giants turning up the competitive pressure.
While the company could turn out to be a decent investment today, I'm not yet convinced it will be a market-beating investment.
Foolish Takeaway
As individual investors, there is nobody who should be telling you to buy something other than yourself. And don't for a moment make an investment just because you can.
At the end of the day, if you want to do better than average, you cannot do what everyone else is doing — that's the definition of average.
I have Telstra and Woolworths shares on my watchlist, but I will not buy them until I'm offered a more compelling entry point.
