Telstra Corporation (TLS, $3.89)
Market capitalisation: $46.3 billion
12-month total return: 50.2%
FY20 projected dividend yield: 4.1%, fully franked
FY20 projected grossed-up yield: 5.9%
Analysts’ consensus target price: $3.78 (Thomson Reuters), $3.49 (FNArena)
If you bought Telstra when we recommended it as a “contrarian play” a year ago, you did well – the stock has moved from $2.76 to $3.89, for a nice capital gain of 41%. Telstra has surprised a lot of people – the analysts’’ consensus price targets at the time were $3.18 at Thomson Reuters and $3.15 at FNArena – and it definitely was a contrarian play.
On top of the capital gain, a shareholder who bought at $2.76 will earn a 5.8% dividend yield if Telstra, as expected, reports a 16 cent dividend for FY19 – representing a grossed-up yield of 8.3%. In a low-interest-rate environment, that is worth its weight in gold.