1 ASX dividend stock down 17% to buy right now

Woman calculating dividends on calculator and working on a laptop.

Telstra Group Ltd (ASX: TLS) shares have fallen out of favour with investors this year.

The ASX dividend stock is currently fetching $3.69, which is a disappointing 17% lower than its 52-week high.

This has been driven largely by the telco giant being classed as a bond proxy. This means that when bond yields are strong, demand for Telstra’s shares is weak. And with interest rate cuts being pushed out to 2025 due to sticky inflation, investors have been staying clear of the telco.

This is despite the company delivering solid results in both August 2023 and February 2024.

While this decline is disappointing for shareholders, could it be a buying opportunity for income investors? Let’s find out.

Is this ASX dividend stock a buy?

Analysts at Bell Potter think Telstra could be a great option for investors at current levels. They recently commented:

In our view Telstra is starting to look reasonable value trading on an FY25 PE ratio of <20x while the average of other reasonable comps in s&p asx20 is now c.23x. admittedly growth outlook for telstra not as good some (e.g. aristocrat, csl and goodman group all have forecast double digit eps fy25) but still has (mid to high single plus a dividend yield (forecast 5.0% fully franked in FY25) and the option of selling part or all of its Infrastructure business (which in our view would unlock value and drive more of a sum-of-the-parts valuation).

The note reveals that the broker has put a buy rating and $4.25 price target on the ASX dividend stock. Based on its current share price, this implies potential upside of 15% for investors over the next 12 months.

In addition, as mentioned above, the broker is expecting some attractive dividend yields from its shares in the coming years.

It is forecasting fully franked dividends per share of 18 cents in FY 2024, 19 cents in FY 2025, and 20 cents in FY 2026. If this proves accurate, it will mean yields of 4.9%, 5.15%, and 5.4%, respectively.

Commenting on its buy rating, Bell Potter acknowledges that Telstra’s shares may not rebound quickly. But it believes this could happen in August. The broker said:

[T]here is perhaps a lack of catalysts in the near term and we do not expect the company to change its view on not selling part or all of the Infrastructure business in the short to medium term. We do, however, see the FY24 result in August as a potential catalyst of sorts given we expect the company to meet – but not exceed – the guidance with the highlights being continued strong growth in the core Mobile and Infrastructure businesses and signs of some turnaround in Enterprise.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the ‘five best ASX stocks’ for investors to buy right now. We believe these stocks are trading at attractive prices and Scott thinks they could be great buys right now…

See The 5 Stocks *Returns as of 1 February 2024

More reading

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.