It’s been a wild ride for the Telstra Corporation Ltd (ASX: TLS) share price in recent years.
While the company’s value has fluctuated, one thing that hasn’t changed is Telstra as a top ASX dividend share.
Times are tough right now and the August earnings season brought some interesting results. Amongst the chaos and the coronavirus pandemic weighing on profits, Telstra maintained its dividend.
However, investors weren’t impressed, with the Telstra share price falling 15% in the last month.
So, is it the Aussie telco a good buy for income or should you look elsewhere for yield in 2020?
Why the Telstra share price could be a good buy
It’s important to note that it wasn’t all good news from Telstra’s August earnings result.
Telstra reported a 9.7% decline in underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to $7.4 billion. That saw the company’s net profit fall 14.4% to $1.8 billion in a tough year for shareholders.
The $3.4 billion free cash flow figure was at the low end of guidance, which allowed Telstra to maintain its full-year dividend at 16 cents per share.
The NBN headwind is expected to continue in FY21 resulting in a forecast $700 million hit to underlying EBITDA. Income investors will be focused on whether or not Telstra can continue its impressing dividend-paying streak.
I think there are some big challenges but also exciting prospects for the future. That includes the fact that Telstra is shaping up as a real leader in the 5G network space.
Capitalising on 5G technologies could be the key to stabilising earnings and growing earnings into the future. Any further changes in work from home arrangements could also boost demand for network capabilities in regional areas and unlock future growth.
The Telstra share price climbed 1.4% higher yesterday and closed the day at $2.88 per share. That means the Aussie telco has a 3.5% dividend yield right now which is quite good in the current climate.
Foolish takeaway
I think income-seeking investors could do much worse than Telstra as a large-cap ASX share with solid earnings potential.
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More reading
- 3 ASX shares for growth, income, and value investors to buy right now
- ASX 200 Weekly Wrap: Friday crash pulls ASX back below 6,000 points
- Why I would buy Telstra and this high yield ASX dividend share
- 2 ASX dividend shares with yields over 5% today
- 2 fantastic ASX 50 shares I would buy today
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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