The Telstra Corporation Ltd (ASX: TLS) share price has had a great week this week so far (touch wood). Today, Telstra shares opened at $3.17 a share and are trading up 0.78% to $3.22 a share at the time of writing.
But the Telstra share price actually closed last week at $3.07 a share. That means the ASX’s largest telco is up more than 4.7% over this week so far. Sure Telstra’s still not anywhere close to its old ‘glory days’ pricing of $6-plus a share. It’s not even back up to near its 52-week high of $3.54.
But a 4.7% increase is a 4.7% increase – a pretty decent bump in a week for an old ASX blue chip like Telstra.
So why has this company suddenly found some appeal on the ASX this week?
Telstra share price on the rise
Well, it’s not because we’ve heard anything from the telco this week. Or for a while, in fact. Telstra’s last market announcement was back on 9 March. That was a routine dividend announcement regarding the upcoming payout Telstra’s shareholders will be receiving on 26 March. Like all of its recent payouts, this dividend will consist of an ordinary dividend of 5 cents a share and a special dividend of 3 cents.
But speaking of dividends, we might have found the reason why investors are taking a second look. This week has seen even more investors fleeing the ASX tech sector. The catalyst was once again rising bond yields, which have really spooked investors today, as a matter of fact.
And that might be the answer to why investors are seeking out the Telstra share price. Rising bond yields reduce the appeal of companies that have yet to deliver positive cash flows but promise to down the road. That mostly applies to the tech sector.
But they also highlight the appeal of shares that offer substantial cash flows today. No one buys Telstra or other blue chips like National Australia Bank Ltd (ASX: NAB) for their massive future growth runways. Things like profitability and dividends tend to be far more relevant for the investor seeking these companies out. That probably explains why Telstra and NAB shares are both in the green today, while tech shares like Afterpay Ltd (ASX: APT) are bleeding heavily.
And the Telstra share price is particularly attractive in this regard. Its 16 cents per share dividend would equate to a market-leading yield of 5% today (or 7.14% grossed-up with full franking).
Sometimes, just going back to the basics can explain what the share market is doing.
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Motley Fool contributor Sebastian Bowen owns shares of National Australia Bank Limited and Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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