In the ever-shifting landscape of the Australian stock market, few companies command as much attention as our telecommunications giant Telstra. As someone who’s watched this blue-chip stalwart weather numerous storms over the decades, I’ve seen firsthand how investors swing between devotion and disappointment. The question that lands in my inbox almost weekly from readers across the country is straightforward yet loaded with complexity: Are Telstra shares worth keeping in today’s market? It’s a question that deserves more than a simple yes or no, particularly as we navigate through changing economic tides and technological transformations that continue to reshape the telecom industry.
Are Telstra Shares Worth Keeping?
Telstra shares are generally worth keeping for income-focused investors seeking reliable dividends and defensive exposure, with the company’s 5G leadership, infrastructure assets, and steady dividend yield of around 6% offering value despite growth challenges. Individual investors should consider their personal financial goals, investment timeline, and risk tolerance before deciding to hold or sell their Telstra shares.
The Current State of Telstra Shares
When I look at Telstra’s share price journey over the past few years, it’s been anything but a smooth ride. After reaching highs of around $6.60 back in 2015, shareholders endured a painful slide down to nearly $2.60 by 2018. Since then, we’ve seen a gradual recovery, though nothing that matches the glory days of the early 2000s. The company’s transformation strategy under CEO Andy Penn, and now under Vicki Brady since 2022, has begun showing promising signs of stability.
The current share price hovering around $4-4.50 represents what I believe is a fair reflection of Telstra’s position – a mature company with established market dominance, strong cash flow, but limited explosive growth potential. What’s particularly noteworthy is the steady dividend yield of approximately 6% when fully franked, which in today’s low-interest environment still makes Telstra an attractive option for income-focused investors who prioritize regular payouts over capital growth.
Is Telstra a Good Dividend Stock?
This is perhaps the most compelling reason many Aussies continue to hold Telstra shares in their portfolios. Throughout market cycles and company transformations, Telstra has maintained its reputation as a dividend stock, though the payout has varied considerably over time.
Telstra currently offers one of the more reliable dividend yields among ASX blue chips, typically around 5-6% fully franked, which translates to a gross yield of about 7-8.5% when including franking credits. This is substantially better than what you’d get from a term deposit or savings account. The company’s management has demonstrated commitment to maintaining dividends even during challenging periods, which provides a certain peace of mind for retirees and income-focused investors. I’ve spoken with numerous older investors who rely on these twice-yearly payments to supplement their retirement income, and for them, Telstra’s dividend policy alone justifies keeping the shares.
However, it’s worth noting that unlike during its heyday, Telstra’s dividend growth prospects are limited. The company faces ongoing capital expenditure requirements to maintain network superiority, particularly with the continuing 5G rollout and future technologies on the horizon. This reality means dividend increases may be modest at best in the coming years.
How Has Telstra’s Business Model Evolved?
I remember when Telstra was primarily known as “the phone company” – those days are long gone. The evolution of Telstra’s business model over the past decade has been nothing short of remarkable, shifting from a traditional telecommunications provider to a technology company with diverse revenue streams.
The company has transitioned from relying heavily on fixed-line revenues to embracing mobile, data, and digital services. With the NBN rollout forcing Telstra to relinquish its monopoly on fixed infrastructure, the company pivoted toward mobile leadership and enterprise services. The creation of Telstra InfraCo to manage physical assets separately from services represents another strategic pivot, allowing for potential future opportunities including partial asset sales or spin-offs.
The most exciting development I’ve been watching is Telstra’s aggressive push into 5G technology, where it currently leads the Australian market in coverage and adoption. This positions the company well for emerging technologies like IoT (Internet of Things), smart cities, and autonomous vehicles – all of which will require robust, high-speed, low-latency connections that Telstra is uniquely positioned to provide.
What Are Telstra’s Growth Prospects?
When considering whether to hold or sell Telstra shares, future growth potential must factor into the decision. The truth is that Telstra faces a complicated growth outlook – its traditional markets are mature and highly competitive, but new opportunities continue to emerge.
Telstra’s most promising growth avenues include enterprise services, 5G applications, and international expansion. The company’s T22 strategy (now evolved into T25) focused on simplification, cost reduction, and customer experience improvements has created a leaner organization better positioned to capitalize on these opportunities. The acquisition of Digicel Pacific and investments in other Asian markets demonstrate Telstra’s ambitions beyond Australian shores.
However, challenges remain substantial. Competition in the mobile space from Optus, TPG, and numerous MVNOs continues to pressure margins. The company’s size makes dramatic growth difficult – it’s simply harder to grow substantially when you’re already the dominant player. And technological disruption remains an ever-present threat, with potential for new communication technologies to undermine existing business models.
How Does Telstra Compare to Other Telecom Stocks?
In the Australian context, Telstra maintains several advantages over competitors like TPG Telecom and Vocus Group. Its scale, network quality, and brand recognition create meaningful competitive moats.
Telstra’s superior network infrastructure and first-mover advantage in 5G give it a technical edge over domestic competitors. The company’s balance sheet strength also provides flexibility for strategic investments that smaller players might struggle to match. When compared to global telecommunications companies, Telstra’s valuation metrics sit roughly in the middle – neither dramatically overvalued nor undervalued relative to peers.
The yield comparison is particularly favorable. Many global telecom giants offer lower yields, making Telstra attractive from an income perspective. What’s more, unlike some international players who’ve accumulated massive debt burdens through acquisition sprees, Telstra maintains a relatively conservative financial structure, though not without its own debt considerations.
What Risks Do Telstra Shareholders Face?
No investment comes without risks, and Telstra shares carry their fair share of potential pitfalls that investors should carefully consider before deciding to hold or sell.
The primary risks include technological disruption, regulatory challenges, and execution risks related to the company’s transformation strategy. The telecommunications industry evolves rapidly – remember how quickly smartphones disrupted traditional telco business models? Future technologies like satellite internet (think Starlink) could potentially bypass traditional network infrastructure, threatening Telstra’s core business.
Regulatory risks are equally significant. As Australia’s dominant telecommunications provider, Telstra faces consistent scrutiny from the ACCC and other regulatory bodies. Mandated network sharing, price controls, or other regulatory interventions could impact profitability and shareholder returns. The political sensitivity around telecommunications services, particularly in regional Australia, means Telstra must carefully balance commercial imperatives with community service obligations.
How Might Telstra Perform in Different Economic Conditions?
One of Telstra’s enduring attractions is its defensive characteristics, which typically provide some protection during economic downturns. Throughout the COVID-19 pandemic, for example, telecommunications services proved essential, with demand remaining robust even as other sectors struggled.
In recessionary environments, Telstra typically outperforms the broader market, as consumers and businesses may cut other expenses before reducing essential communications services. The stable dividend yield becomes especially attractive during periods of market volatility, providing a floor to the share price as income-focused investors seek refuge from market storms.
Conversely, during strong bull markets and economic booms, Telstra may underperform growth-oriented sectors as investors chase higher returns elsewhere. This counter-cyclical behavior makes Telstra shares a useful component of a diversified portfolio, potentially smoothing overall returns across different market conditions.
Should You Hold Telstra for the Long Term?
The decision to hold Telstra shares for the long term ultimately depends on your investment objectives, time horizon, and portfolio strategy. From my perspective, after following the company for over 15 years, there are compelling arguments both for and against long-term ownership.
For income-focused investors with a medium to long-term horizon, Telstra remains an attractive holding. The dividend yield, combined with franking credits, provides tax-effective income that’s difficult to match in today’s low-interest environment. The company’s essential service nature and infrastructure assets provide a measure of inflation protection that pure financial assets lack. And despite challenges, Telstra maintains powerful competitive advantages that should sustain its market position for years to come.
However, investors seeking significant capital appreciation might find better opportunities elsewhere. Telstra’s size and market maturity make dramatic share price growth unlikely without substantial industry disruption or strategic transformation. Younger investors with longer time horizons and growth-oriented goals might consider allocating only a portion of their portfolio to Telstra while seeking higher growth opportunities elsewhere.
When Might Be the Right Time to Sell Telstra Shares?
Timing investment decisions is notoriously difficult, but there are certain scenarios where selling Telstra shares might make sense regardless of market timing considerations.
Consider selling if the company’s competitive position significantly deteriorates, dividend sustainability comes into question, or your personal financial circumstances change. Warning signs might include loss of mobile market share, increasing debt levels without corresponding growth investments, or cuts to the dividend payout.
From a valuation perspective, Telstra shares trading significantly above historical P/E ratios (particularly above 18-20x earnings) might signal an opportune time to trim positions. Similarly, if alternative investments emerge that better align with your financial goals and risk tolerance, reallocating from Telstra may be prudent.
Personal circumstances matter tremendously here. If you’re approaching retirement and need to shift toward more conservative investments, maintaining or even increasing Telstra exposure might make sense. Conversely, if you’re decades from retirement with substantial income needs, reducing Telstra in favor of growth-oriented investments could be appropriate.
FAQs about Telstra Shares
Is Telstra a buy, hold or sell?
Telstra currently represents a “hold” for existing shareholders seeking dividend income with moderate growth potential. The company’s strong market position, reliable dividend, and 5G leadership make it a reasonable holding for income-focused portfolios. However, investors should regularly reassess based on changing company performance, industry dynamics, and personal financial needs.
Does Telstra pay good dividends?
Yes, Telstra pays comparatively good dividends by Australian market standards. With a yield typically around 5-6% fully franked, Telstra offers attractive income returns compared to other blue-chip stocks and fixed-income alternatives in the current low-interest environment. The company has maintained its commitment to returning capital to shareholders even during challenging business transitions.
What percentage of Telstra shares are owned by retail investors?
Approximately 50-60% of Telstra shares are owned by retail investors, making it one of the most widely held stocks in Australia. This high retail ownership stems from Telstra’s privatization history and its reputation as a reliable dividend stock. Many Australians hold Telstra shares either directly or through their superannuation funds.
How often does Telstra pay dividends?
Telstra pays dividends twice yearly, typically in February/March (interim dividend) and September/October (final dividend). This semi-annual payment schedule provides regular income streams for shareholders relying on dividend payments for living expenses or reinvestment.
Conclusion:
After weighing all factors – dividend yield, growth prospects, competitive position, and risk considerations – I believe Telstra shares continue to deserve a place in most Australian investment portfolios, though the appropriate allocation depends on individual circumstances.
For retirees and income-focused investors, Telstra’s reliable dividend stream provides valuable income in a world of low interest rates. The company’s essential service nature and infrastructure assets offer defensive characteristics that can help weather market volatility. While growth may be modest compared to tech high-flyers or emerging sectors, the stability and income Telstra provides should not be undervalued.
That said, no single investment is right for everyone. Your decision about whether to keep, increase, or sell Telstra shares should reflect your unique financial situation, investment goals, and risk tolerance. I encourage readers to consider these factors alongside professional financial advice tailored to their specific circumstances rather than making decisions based solely on general market commentary.
Whether you’ve held Telstra since the T1 privatization or are considering a new position, remember that the best investment decisions align with your personal financial roadmap rather than chasing market trends or responding to short-term price movements. In Telstra’s case, that often means appreciating the company for what it is – a mature, dividend-focused cornerstone of Australian business – rather than expecting it to become something it’s not.