Better with bank account


Published in the Canberra Times, September 2009

Holding shares in Telstra may not make good investment sense and some investors might have been better off parking their money in a bank account for the past 10 years, a market analyst says.

"I have said it before and I will say it again, for the life of me I cannot understand why anyone would want to own Telstra, it just does not make good investment sense," the chief analyst at boutique investment company Wealth Within, Dale Gillham, said.

Shares in Telstra have see-sawed this week after the Federal Government on Tuesday announced reforms to the telecoms industry and proposed Telstra split its retail and wholesale arms, by either voluntary or forcible means.

The Government said it wanted to create a more level playing field in the market ahead of the build-out of its $43 billion high speed national broadband network.

About $2 billion was swiped off Telstra's market value on Tuesday when the stock fell 4.31 per cent.

It rose 4.18 per cent on Wednesday and edged up 2c on Thursday but fell lc to $3.25 yesterday.

"The announcement this week that the Government is forcing Telstra to break tip its operations has compounded the fall in the share price, although in my opinion it is a good idea and one which may see the share price actually start to rise," Mr Gillham said.

While many investors continued to hold Telstra shares for its dividend payouts, lie said there were other stocks that also paid solid dividends.

"There are many other good stocks on our market that pay solid dividends, and contrary to Telstra have actually risen in price over the years," lie said.

"It takes a lot of dividends to recoup from a fall of over 60 per cent, which Telstra has suffered over the past 10 years.

"If you look at the real return investors received by holding on to this stock in the past 10 years, you would find most, if not all, would have been better off investing their money in a bank account."

Other analysts said changes to Telstra's business, flowing from the reforms, could improve shareholder value in the future.

Brokers Royal Bank of Scotland, UBS, Goldman Sachs JBWere and Merrill Lynch all this week maintained their buy ratings on Telstra shares.


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