The Telstra Corporation Ltd (ASX: TLS) share price has been out of form in 2020.
Since the start of the year the telco giant's shares have dropped 14% lower.
Is this a buying opportunity for investors?
Although it has fared better than the S&P/ASX 200 Index (ASX: XJO), I've been surprised by the poor performance of the Telstra share price during the coronavirus pandemic. Especially given its defensive qualities in such volatile times.
These defensive qualities have been on display for all to see over the last couple of months. At a time when countless companies have been withdrawing or downgrading their guidance, Telstra has stood strong and reaffirmed its guidance for free cash flow, underlying EBITDA, and capital expenditure guidance in FY 2020.
And while certain initiatives it is taking to support the economy (such as postponing job cuts and hiring temporary staff), means it is expecting to hit the lower end of its guidance, this still gets a big tick from me.
In light of this, I believe Telstra is well-placed to maintain its fully franked dividend at 16 cents per share this year. This equates to a generous 5.2% dividend yield, which is very attractive given how far rates have fallen and the many dividend deferrals from other blue chip shares.
Though, it is worth noting that not everyone agrees with this. A few analysts expect the telco giant to be prudent and cut its dividend down to 14 cents per share. While I don't think this is necessary, it is admittedly a possibility. But given how both dividends would still provide above average yields, I don't see a two cents dividend cut as a reason not to invest.
What about the future?
Another reason I would be a buyer of its shares is its increasingly positive outlook.
Times certainly have been hard for Telstra due to the NBN rollout. But thankfully, this rollout is nearing completion and "peak pain" from it is within sight. This means that the headwinds it is facing from the NBN will soon ease and a return to profit growth could be on the agenda.
Especially given the T22 strategy which is stripping out significant costs and making Telstra into a leaner operation.
Overall, I think now is an opportune time to invest and I would choose it ahead of rivals TPG Telecom Ltd (ASX: TPM) and Vocus Group Ltd (ASX: VOC).
