4 reasons to buy Telstra shares for 2025

Goldman Sachs sees a number of reasons to buy this telco giant's shares now.

| More on:
A young woman drinking coffee in a cafe smiles as she checks her phone.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Telstra Group Ltd (ASX: TLS) shares are a popular option for Aussie investors.

But are the telco giant's shares a good one right now? According to Goldman Sachs they are.

The broker has named a number of reasons why it thinks investors should be snapping up the company's shares for the year ahead.

Four reasons to buy Telstra shares

The first reason that Telstra could be a good option for investors is its low risk earnings and dividend growth. Particularly in the current uncertain economic environment. It said:

Telstra is the incumbent telecom operator in Australia. We believe the low risk earnings (and dividend) growth that Telstra is delivering across FY22-25, underpinned through its mobile business, is attractive.

Another reason to buy Telstra shares could be its potential to unlock significant value through asset divestments. This includes both its InfraCo Fixed assets and its NBN payment stream. Goldman explains:

We also believe that Telstra has a meaningful medium term opportunity to crystallise value through commencing the process to monetize its InfraCo Fixed assets – which we estimate could be worth between A$22-33bn. Although there is some debate around the strategic benefits, we see a strong rationale for monetizing the recurring NBN payment stream, given its inflation-linked, long duration cash flows could be worth A$14.5bn to A$17.9bn, with no loss of strategic benefit.

What else?

Goldman also believes that Telstra's shares look good value when adjusting out its NBN recurring payments. It notes:

Although at a headline level, Telstra valuation appears relatively full (vs. peers and vs. 10Y yield), we note: Adjusting out NBN recurring payments (a unique asset), Telstra trades at a much more compelling multiple.

Finally, the broker highlights the attractive dividend yield on offer with its shares as a reason to buy. It concludes:

Although its yield spread is compressed vs. history, when factoring dividend growth this is more attractive. Hence we rate Telstra Buy.

Goldman is forecasting fully franked dividends per share of 19 cents in FY 2025, 20 cents in FY 2026, and then 21 cents in FY 2027. Based on its current share price of $4.03, this equates to yields of 4.7%, 4.95%, and 5.2%, respectively.

The broker currently has a buy rating and $4.50 price target on its shares. This implies potential upside of over 11.5% for investors over the next 12 months.

And including dividends, the total potential return stretches to over 16%.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. 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.

More on Communication Shares

A man sits thoughtfully on the couch with a laptop on his lap.
Broker Notes

Why Macquarie forecasts this ASX All Ords media company is set to surge 19%

Up 42% in 2025, here’s why this ASX All Ords media stock could keep racing higher into 2026.

Read more »

A cute little kid in a suit pulls a shocked face as he talks on his smartphone.
Communication Shares

Where will Telstra shares be in 3 years?

How much business growth can Telstra shareholders look forward to?

Read more »

Magnifying glass in front of an open newspaper with paper houses.
Communication Shares

Should I buy News Corporation or REA Group shares?

News Corporation is the majority owner of REA Group.

Read more »

Two male ASX investors and executives wearing dark coloured suits sit at a table holding their mobile phones discussing the highest trading ASX 200 shares today
Communication Shares

Own Telstra shares? Here's what brokers are saying about its new strategy

Let's see what they are saying about this telco giant's bold new plans.

Read more »

man using a mobile phone
Communication Shares

Telstra share price lower on Connected Future 30 strategy

Could fully franked dividends be coming an end?

Read more »

A man casually dressed looks to the side in a pensive, thoughtful manner with one hand under his chin, holding a mobile phone in his hand while thinking about something.
Communication Shares

3 reasons why the Telstra share price could still be a buy

This telco could still be a very attractive opportunity.

Read more »

A cute little kid in a suit pulls a shocked face as he talks on his smartphone.
Share Market News

Telstra share price hits 8-year high amid a lacklustre trading week

The ASX 200 communications services sector was the best performer last week, rising 2.96%.

Read more »

Man smiling at a laptop because of a rising share price.
Dividend Investing

Guess which high-yielding ASX All Ords dividend stock Macquarie expects to surge 34% in a year

Looking for market-beating passive income and share price gains? Check out this ASX All Ords stock!

Read more »