How To Buy Telstra Shares

Initially listed on the Australian Securities Exchange (ASX) in 1997 with the ticker symbol TLS, Telstra is now one of Australia’s top 20 largest companies with a market capitalisation of more than $43 billion.

At the time of its float back in the late 90s, the share price was around the $2.60-$2.70 mark. At their height in 1999, Telstra shares were valued at over $9 a share, with numerous fluctuations in value since then, before steadying at around the $4 per share mark in recent years.

The company almost doubled in size in the five-year period from 2010 onwards, largely attributed to the leadership of then-CEO David Thodey. While the Telstra share price under Thodey doubled, peaking at $6.50, it slumped again the subsequent years.

An unfavourable National Broadband Network (NBN) deal reduced the telco’s profits and caused the company to cut annual dividends in 2017 from 31c per share to 22c. Weaker earnings saw dividends slashed again in 2020 to 16c and also caused a temporary dip in Telstra’s share value.

With the NBN rollout largely complete and Covid disruptions easing, some analysts feel the telecommunications industry is rebounding and a major player like Telstra could offer good value for investors going forward.

In financial year 2023, Telstra reported earnings of $7.9 billion, a 16% increase in earnings per share (EPS). Most recently, Telstra released its half-year results, in which it announced income growth of 1.2% to $11.7 billion. Net profit was $1 billion, up 11.5% from the corresponding period of the previous year, while underlying earnings before interest, tax, depreciation and amortisation (EBITDA) rose 3.1% to $4 billion.

The Telstra board announced a fully franked interim dividend of 9 cents per share.

Year-to-date, the Telstra share price has declined by around 3% with a current market value of around $3.8 per share. It’s lower than it was this time last year, and lower than its price 10 years ago.

Telstra’s price-to-earnings (P/E) ratio is 22.8. As a basic guide to a stock’s value, Telstra’s P/E ratio indicates each share’s market value is 22.8x what an investor would currently earn from each share. Comparatively, TPG Telecom’s P/E ratio is 24.8 (TPG is Vodaphone’s parent company).

Broker Morgan Stanley suggested Telstra was a stock to ‘buy’ in May last year, a recommendation it switched to ‘hold’ in August following the telco’s release of its FY23 results. The main reason for the downgrade was Telstra’s reversal on plans to sell part of InfraCo—its arm that delivers physical telecommunications infrastructure for businesses and industry.

Unimpressed investors led to a sell-off in August and Telstra’s share value dropped by more than 6% at one point. It has tracked at below the $4 mark since, rising slightly after the company’s AGM in October.

In addition to Telstra’s own profitability and ability to entice customers, its prospects (and market value) hinge heavily on factors including government telecommunications policies, technological innovation, and competitor performance.

Telstra is a well-known dividend-paying stock, with dividends paid out twice a year. Telstra dividends are fully franked, which can provide tax benefits.

Growing its dividends to return profits to shareholders is also a clearly-stated goal of the company, which makes it appealing to investors seeking reliable passive income without significant risk—given that Telstra is a stable, market-leading company.

However, TLS is by no means the only dividend-paying stock available on the ASX. Telstra critics also argue that the size of its dividend doesn’t justify the insubstantial capital growth in the TLS share price over time.

Most everyday Australians begin investing by purchasing ASX-listed shares, and high-profile, large-cap stocks like TLS are generally well-regarded. For example, recent research into the Australian shares most popular with people managing their own super ranks Telstra in seventh spot after the big four banks and two miners.

You can buy Telstra shares through any participating ASX stockbroker. Investment and wealth management firms are examples of full-service stockbrokers—people generally pay a premium to access these services when they want expert advice on how to invest as well as support to execute trades.

A cheaper and more accessible option is using one of the many online share trading platforms/apps that are available to Australians. Prioritise a platform that offers access to the ASX, is regulated by ASIC, has reasonable and transparent fees, and is user-friendly. Then follow these steps:

1. Open a trading account: Like any online service, you’ll need to follow set-up steps including providing personal details and verifying your identity. Once you have an account, you’ll need to add money (through a bank transfer, BPAY etc.) that you can trade with.
2. Decide when to invest: If you’re convinced you want to own a piece of Telstra, and you believe its share price will rise over time, there’s no better time to invest than now. However, you might prefer to wait until you feel like Telstra’s share price presents a bargain.
3. Decide how much to invest: Minimum investment amounts vary app to app, but generally you’ll need to spend at least $500 on shares the first time you invest in a stock. Keep in mind that cost-effectiveness is critical to building a portfolio sustainably—consider how much brokerage fees will eat into your trade and whether it would make sense to invest a larger lump sum if you can afford it.
4. Get familiar with trading tools and terms: For beginners, it’s wise to become more comfortable with how trading platforms work. Many online brokers offer practice/demo accounts where you can place trades without risking real cash. This also lets you get familiar with different order types including market orders (buy at current price) or limit orders (buy if/when shares reach a certain price).
5. Place a buy order: To purchase your Telstra shares, simply search for the TLS ticker symbol within your account, select the buy option, specify your order type, enter the amount of the trade and then confirm your purchase.
6. Create a record of your investment: A best practice habit to get into is keeping your own records of when you buy and sell stocks. A basic spreadsheet will do. Track the dates, purchase/sale prices, amount spent/earned, dividends received, and transaction fees. This will help you determine any capital gains and losses to be declared at tax time.
7. Monitor and adjust your investment: Now that you’re officially a Telstra investor, it makes sense to keep track of how it’s travelling. You could review Telstra’s company updates and reports, follow finance/industry news and check out the ASX website. Depending on your investing strategy and timeframe, you might choose to trade Telstra shares (buy more, or sell some/all) based on changes in the share price, company operations, or broader economic conditions.

You sell shares to either make money, or avoid large losses. Let’s say Telstra shares show signs of an enduring decline due to poor business decisions or the innovation of a rival—you might sell at a loss, and instead invest in a stock that represents a better opportunity for gains.

To take profits you could also sell when Telstra’s share price is high and reinvest in the stock when prices dip again. The downside of this approach is increased transaction costs, plus having to stay abreast of price movements so you can time your trades.

Others who invest in quality stocks have a more ‘set and forget’ approach. But even if you plan to hold long-term, you may eventually have a need to cash in some or all of your Telstra stock to fund your financial goals—for instance, an overseas holiday.

In any case, it’s helpful to set guidelines in advance, so you’re clear about what would prompt you to sell. Perhaps you don’t want to own Telstra shares if the P/E ratio goes above 25.

Selling Telstra shares is achieved the same way you purchase them: through a stockbroker. If you’re using an online brokerage platform, you’ll need to:

• Navigate to the shares you own within your online account;
• Decide the amount you want to sell and your price target (if you want to buy/sell at a price that differs from the current market value);
• Place a sell order to sell immediately, or you might apply a limit order whereby the sale is only executed once your stock reaches a specified value.
• Wait for the sale to be settled (usually a few days). Then you can transfer the funds from your account to spend as needed, or keep them in your account ready to reinvest.

Shareholders without a broker that hold issuer sponsored shares, represented by a security reference number (SRN), can sell via Telstra’s share registry provider Link Market Services.