Richard Coppleson On Should I Buy Telstra

Did anyone read this today,

"Bell Potter's head of institutional sales, veteran broker Richard "Coppo" Coppleson, says he's always asked the same question: "Should I buy Telstra?".

His reply: "I have never bought Telstra and I'm guessing (well can guarantee) I never will".

The big telco is down again today to $3.15 and is trading at six-year lows "as the market is basically saying the dividend cannot be maintained over the long term (or - as it actually seems - even over the short term)," Coppo writes.

"There are numbers I dream of (like those of Aristocrat) and there are numbers that almost make me spew in horror," he writes. Telstra appears to belong in the latter camp. Coppo says he would "not go near" a stock that has earnings per share growth of -23.1 per cent in 2018 (going from 28.1c to 21.6c), using Citi estimates.

In 2019, Citi estimates Telstra's EPS will shrink another 10 per cent (from 21.6c to 16.4c) and in 2020 contract a further 14.5 per cent (from 16.4c to 13.3c).

A big redeeming feature of the stock appears the generous dividend yield of 6.9 per cent, which grosses up to 9.1 per cent.

But if the Citi numbers are right and Telstra does only earn 16.4c in 2019, then on a 80 per cent payout ratio the dividend "must be cutto 13c vs the 18c right now".

"So the market is slapping any investor in the face who will listen - TELSTRA'S DIVIDEND IS UNSUSTAINABLE," Coppo says, presumably banging the table for emphasis.

"We now expect the board will use the special dividends to smooth out the decline, and expect a 2c cut in the total dividend in each of the next three years.

"With so many great quality stocks in the market - be those growth or value stocks - why would you buy something that has been in a terminal decline from $6.50 three years ago to $3.18 today; ie, a drop of -51 per cent."


Maybe he should have written this when the share price was 6, 5 or even 4 dollars!

Also do a chart on share price declines on TLS, TPG and VOC for the YTD -14.21 -15.93 and -27.92 percent respectively. Now let's talk about " terminal decline" or is it just a bit of cheap publicity?

My sentiment is hold now, I didn't sell at or near the top why would I sell now at the bottom.