Telstra Group Ltd (ASX: TLS) shares experienced a slight dip in early afternoon trading on Tuesday, falling by 0.3% to $4.865. This comes after the telecommunications giant closed yesterday at $4.88. In contrast, the broader S&P/ASX 200 Index (ASX: XJO) saw a modest gain of 0.3% during the same period.
While the current trading day shows a minor setback, Telstra’s performance over the past 12 months paints a much rosier picture. The company’s stock has surged by an impressive 24.4%, significantly outperforming the ASX 200’s 4.9% gain for the same period. This strong capital appreciation doesn’t even account for the two fully franked interim dividends Telstra has distributed to shareholders over the last year.
Three Compelling Reasons to Consider Telstra Shares
Family Financial Solutions’ Jabin Hallihan, speaking via The Bull, has highlighted three key factors that suggest Telstra is poised for further outperformance in the coming months. He views the Australian telecommunications leader as a prime investment opportunity.
1. Strong Financial Performance and Undervaluation
Hallihan’s first point of confidence stems from Telstra’s robust financial results. For the full year 2025, the company reported a net profit after tax of $2.3 billion, marking a substantial 31% increase compared to the previous financial year. Earnings per share also saw healthy growth, rising by 12% to 22.4 cents.
* Telstra’s reported net profit after tax for FY25 was $2.3 billion.
* This represented a 31% increase on the prior corresponding period.
* Cash earnings per share grew by 12% to 22.4 cents.
At the time of reporting, Telstra shares were trading at $4.935 on February 5th, which was below Family Financial Solutions’ assessed fair value of $5.40. This suggests that, even with the slight dip observed today, Telstra’s current share price of $4.865 remains approximately 11.0% below its calculated fair value by Family Financial Solutions, presenting a potential buying opportunity for investors.
2. Strategic Capital Management and Resilient Earnings
The second compelling reason for Hallihan’s buy recommendation is Telstra’s commitment to cost discipline, coupled with its active share buy-back programs and consistently strong mobile earnings. These factors are seen as crucial in supporting steady upside, particularly in a market environment that currently favours defensive assets.
Share buy-backs are a strategic tool that can significantly influence a company’s share price by reducing the number of outstanding shares available on the market, thereby potentially increasing earnings per share and overall shareholder value.
Following the release of its full-year FY2025 results on August 14th, Telstra announced an additional on-market share buy-back initiative, aiming to repurchase up to $1 billion worth of its shares.
Telstra CEO Vicki Brady elaborated on this decision, stating that the buy-back was made possible by the company’s earnings growth and a robust balance sheet. She emphasised the company’s ongoing focus on delivering shareholder value through various avenues, including:
- Generating strong cash flow from its core business operations.
- Actively managing its portfolio of assets and investments.
- Maintaining disciplined capital allocation strategies.
3. Attractive Passive Income Stream
The third reason to consider investing in Telstra shares today is the attractive passive income it provides through its reliable dividend payments. Hallihan pointed out that Telstra consistently offers fully franked dividends, a significant benefit for Australian investors.
In fiscal year 2025, Telstra’s full-year dividend stood at 19 cents per share, representing a 5.6% increase from the previous year. At the time of reporting, Telstra (TLS) was trading on a dividend yield of 3.85%, offering a solid return for income-focused investors.
Should You Invest $1,000 in Telstra Corporation Limited Now?
Before making any investment decisions, it’s always prudent to conduct thorough research. While Telstra presents a strong case for investment based on its financial performance, strategic capital management, and dividend payouts, it’s wise to consider a broad range of perspectives.
For instance, investment expert Scott Phillips, from Motley Fool Share Advisor, recently identified what he believes are the top five stocks for investors to consider right now. It’s worth noting that Telstra Corporation Limited was not among those top five picks at that particular time. Motley Fool Share Advisor, a service that has been guiding investors for over a decade, has a track record of identifying stocks that have delivered significant returns for its subscribers.
Investors might also want to explore other opportunities in the market. There are other ASX blue-chip shares that are currently offering attractive dividend yields, and various experts have recommended other ASX 200 shares for potential investment. The question of whether it’s the right time to invest in defensive ASX shares is also a common consideration for many. Some analyses suggest overlooking certain ASX 200 shares in favour of others, such as Telstra and Zip shares, based on expert opinions. For those interested in passive income, understanding how much capital is needed to generate a specific monthly income, like $500, is also a valuable area of research.
Note: The information presented here is for general informational purposes only and does not constitute financial advice. Investing in the stock market involves risks, and individuals should consult with a qualified financial advisor before making any investment decisions.
