Could the Telstra Corporation Ltd (ASX: TLS) share price fall as low as $3? Some investors will no doubt be wondering that after the company revealed mediocre growth and announced that it would cut its future dividends.
At $3.88, the Telstra share price is down 27% in the past 12 months:
Based on the forecast dividend of 22 cents in the future, Telstra pays a 5.6% fully franked dividend at today's prices. Given that the company earned around 29 cents per share in free cash flow according to my estimates, and reported modest growth in earnings, the dividend looks sustainable.
If earnings don't reverse and debt doesn't get out of control, I can't see Telstra shares at $3 in the foreseeable future – not least because they would be paying a 7.3% dividend at those levels. I'd be happy to buy Telstra for the dividends today.
