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Should you buy Telstra shares for Christmas?

Kenneth Hall

The Telstra Corporation Ltd (ASX: TLS) share price has had a good year in 2019.

Telstra shares are up 29.24% this year and is ahead of the S&P/ASX 200 Index (INDEXASX: XJO).

So, what’s driving the company’s shares higher this year, and should they be on your wish list for Christmas?

Why the Telstra share price is up this year

While Telstra’s 2019 performance has been good, it has come after a significant decline in 2018.

The Telstra share price slumped 24.13% in the 2018 calendar year alongside most of the ASX 200.

The main catalyst throughout all these years has remained the same: NBN Co.

The National Broadband Network (NBN) has hit Telstra’s earnings profile and growth prospects hard. Despite the government-backed rollout continuing in 2019, the company’s valuation has seen a rebound of sorts.

One factor driving this has been Telstra’s potential advantage in the growing 5G network space.

The proposed merger between TPG Telecom Ltd (ASX: TPM) and Vodafone Australia could be a blessing in disguise for Telstra. While the merger was initially blocked by the ACCC, it did cause TPG to abandon its 5G network plans.

This leaves Telstra in prime position to capture disgruntled NBN customers and become a true ASX blue-chip dividend stock again.

The last piece of the puzzle is monetising the network and seeing a consistent uplift in earnings and dividends.

Should you buy before Christmas?

The Telstra share price has delivered strong capital gains to investors in 2019.

At $3.58 per share, Telstra’s valuation is down some 45% from February 2015.

However, the company still has a market cap of $42.5 billion and a dividend yield of 2.79% per annum.

If Telstra can capture a significant part of the 5G network market, then the pickup in earnings could be significant.

If you’re buying Telstra shares, it really is speculating on which way the telco industry will go with the technology and how Telstra will position itself within that.

The post Should you buy Telstra shares for Christmas? appeared first on Motley Fool Australia.

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Motley Fool contributor Kenneth 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.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019