Richard Coppleson On Should I Buy Telstra, page-8

From "Business Insider 17th Aug 2017"
(Telstra... on 8th Aug 2017 ...  $4.11)
Richard Coppleson, the former Goldman Sachs equity strategist now at Bell Potter, let rip a spectacular rant earlier this month on the problems with investor psychology in Australia around dividends on stocks like Telstra.
In the August 8 edition of his celebrated daily “Coppo Report”, Coppleson revealed he had had barneys with clients about their insistence on holding Telstra for the income. Here’s what he said:
Now will those (blind) Telstra bulls (at any price) finally listen – I’ve had massive fights with (mainly those who are “big” on income) that the stock is going lower & dividend could be a risk.
They argue that everyone’s on the phone – their kids use it, the NBN, and “Hey Coppo – you just don’t get it you nor all those stupid instos (sorry guys you were also included) – Ok when this took place the stock was at $5.00 & they “pay a 31c dividend – now that puts them of a big fat dividend yield of 6.2%”.
They go on.. “Coppo you just don’t get it do you – it’s on a 6.2% FULLY FRANKED dividend yield – so if you ”gross it up” then it’s on a dividend Yield of 8.8% that’s vs RBA Cash Rate of 1.5% – I love that type of investment” (and guess what this guy also thought the RBA was going to cut). Ok he “loved” Telstra back then at $5.00 & yield of 6.2% ff (he was “piling them into his Super Fund as it was a real “no brainer”).
well the “Dividend Yield” on Telstra today has “ballooned” out to 7.5% ff, or grossed up 10.80% BUT the share price has dropped from $5.00 to $4.09 a drop of -91c or a capital loss of -18%.
So the lesson is that investors want “income” and that is only going to increase over time.
BUT chasing a stock for its “yield” only (and the bigger the yield the more you should worry) has never been a great strategy.
BUT having said all that Telstra will find massive buying support anytime it gets to $4.00 as yield hungry investors look for income. The other way to look at Telstra here at $4.09 is that say they cut the dividend from 31c to 26c a huge 16% drop – at 26c the stock would be on a dividend yield of 6.3% fully franked or 9.1% grossed up.
So I’d say we have got Telstra stuck in a solid trading band of $4.00 BUY… to $4.50 / $4.75 SELL….
(As it happens, after its initial plunge, Telstra shares have climbed off the mat and a short time ago were trading at $3.99, down 8% and just 1c lower than where Coppleson said it would find buyers.)