Should ASX investors buy the dip in Telstra stock?

The telco is widely held by retail investors but has disappointed for most of its life. Is a bull run finally coming?

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Even though it has been a staple for many mum-and-dad portfolios over the decades, historically Telstra Group Ltd (ASX: TLS) stock has been frustrating to own.

However, investors started getting excited last year as the telco shares rose more than 15% in about six months, all while paying a healthy dividend yield above 4%.

But now Telstra shares are 13% down again.

So is this time to pounce on this iconic Australian brand?

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Ready to rock

Firstly, the business is looking healthy.

Telstra still enjoys a dominant position in the Australian telecommunications landscape, while its nearest rival Optus has struggled with scandal after scandal in recent years.

It has now completed its T22 strategy for profit growth in the post-NBN era.

And perhaps this is why professional investors are tipping that the share price is due for a revival.

Broking platform CMC Invest shows that 15 out of 18 analysts currently rate Telstra shares as a buy. Twelve of those think it's a strong buy.

One of those enamoured with the stock is Bell Potter, upgrading its rating to buy just last month.

"Bell Potter made the move on valuation grounds following a period of underperformance from Telstra's shares," said The Motley Fool's James Mickleboro.

"It highlights that this has left them looking for reasonable value trading on an FY 2025 price-to-earnings (P/E) ratio of under 20x. Bell Potter notes that this is lower than the average multiples of other comparable companies."

Healthy dividends expected from Telstra stock

The team at Goldman Sachs Group Inc (NYSE: GS) is also a fan, due to Telstra's "low-risk earnings and dividend growth".

"It is expecting this to lead to Telstra paying fully franked dividends of 18 cents per share in FY 2024, 19 cents per share in FY 2025, and then 20 cents per share in FY 2026," reported Mickleboro last month.

"Based on the current Telstra share price of $3.78, this equates to yields of 4.75%, 5%, and 5.3%, respectively."

Telstra shares closed before the Easter weekend 1.85% higher at $3.85.

So the answer is that investors may be well advised to buy Telstra stock during the current dip. The professionals are certainly getting onto it.

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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