The Telstra Corporation Ltd (ASX: TLS) share price is having a great day today. At the time of writing, Telstra shares are up 2.15% to $3.32 a share. That's roughly the highest Telstra has climbed since August last year. But Telstra is also having a great week. Over the past 5 trading days, Telstra is up more than 5.5%. The Telstra share price is also up 8.3% since 11 March, and up 10.13% year to date.
So what's going on with the ASX's biggest telco?
What does the Telstra share price have going for it in 2021?
There's a lot going for Telstra right now in the eyes of many investors. The ASX is abuzz with rising bond yields and talk of future inflation down the road. Record stimulus over in the US is fuelling these fears, now that the passage of the Biden administration's US$1.9 trillion stimulus package has passed. Commitments from central banks around the world, including our own Reserve Bank of Australia (RBA), to keep record low-interest rates and quantitative easing (QE) programs in place are also helping.
Since Telstra provides services (like internet, mobile phones and data) that are 'needs' rather than 'wants' these days, it could be viewed by investors as an inflation-resistant company. That's because if inflation did hit, Telstra could probably raise its prices to keep up without losing customers. That's all theoretical of course, but it is worth considering.
Further, Telstra also has an attractive dividend yield in the current market. The telco kept its generous 16 cents per share dividend intact through all of last year. It has also all-but-promised to do so again this year. On current pricing, that dividend is worth a yield of 4.82%, or 6.88% grossed-up with Telstra's full franking. That compares very well against other ASX 200 blue chips like the banks right now.
Hitting the switchboard
Telstra has also been the talk of the town following an update to its proposed legal restructuring this week. Yesterday, Telstra told the markets that its proposed restructure, which will involve separating the company into four divisions under 'The Telstra Group', would be completed by December 2021. That's if it gets shareholder approval at its October annual general meeting, of course.
Many investors are hoping that this restructure will unlock a lot of value for shareholders. Investors are particularly excited about the new InfraCo Fixed division, which will house Telstra's fixed-line infrastructure assets. These include fibre ducts, data centres and exchanges. There is also the elephant in the room – the potential that InfraCo could bid for the government-owned nbn network once it goes up for sale.
It's likely that a combination of these factors has been what's behind the strength in the Telstra share price of late.
