Telstra Corporation Ltd (ASX: TLS) shares have outperformed in 2020 despite broad market volatility. While the S&P/ASX 200 Index (ASX: XJO) has fallen 19.91%, Telstra shares are ‘only’ down 12.57% this year.
But despite holding value better than many of its ASX 200 peers, is the Aussie telco in the buy zone?
Why I’d buy and hold Telstra shares for a decade
Telstra has been a staple of Australian share portfolios for decades. The Aussie telco was favoured for its 100% dividend payout policy before slashing it lower in recent years. However, its shares currently yield a tidy 3.20% and, I believe, still have some serious upside.
Telstra is shaping up as a potential leader in the 5G network space. The group continues to invest heavily in the future which I think is key in this hyper-competitive industry. With NBN Co breathing down its neck, Telstra is focusing strongly on maintaining market share.
Innovation is also a key reason I’d buy and hold Telstra shares for a decade. The company’s ‘Telstra 2022’ strategy illustrates forward thinking and, furthermore, the group is also focused heavily on slashing its costs.
Having said that, the changing face of its competition has the potential to negatively impact Telstra’s profitability. The proposed merger between TPG Telecom Ltd (ASX: TPM) and Hutchinson Telecommunications (Aus) Ltd (ASX: HTA) is shaping up to be a real threat to Telstra’s long-term future.
The merger would combine Vodafone‘s and TPG’s capabilities and create another major player alongside Telstra and Optus. However, there is also the opportunity for Telstra to capture more market share amid an industry shake-up.
This means shares in the Aussie telco could see some real gains if its Telstra 2022 strategy pays off. Given its strong dividend yield in the short to medium term and a solid long-term growth outlook, I think there are worse buys than Telstra.
I also think the move towards working from home more could benefit Telstra. More remote working means increased demand for mobile infrastructure, which could benefit this market leader.
Foolish takeaway
Telstra shares have fallen lower in 2020, but it’s important to invest for the long-term. I prefer to drown out the day-to-day noise and look at Telstra as a company to buy and hold for the decades ahead.
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More reading
- How to invest $1,000 like Warren Buffett today
- ASX 200 down 0.9%: Xero posts strong growth & Australian economy loses 594,300 jobs
- Should you cash out of this ASX 200 rally?
- This ASX 200 share is rocketing higher after delivering more strong sales growth
- David Tepper believes we’re in the biggest stock bubble since 1999
Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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