FOR a  stock with more than most riding on the  result of the current protracted political gridlock, Telstra has a lot of fans in the investment community at the moment.

At Friday’s close of $2.82, it remains only 8¢ above the  miserable record low of $2.74 struck recently, yet you can sense investor sentiment  is changing.

Telstra has already warned that its earnings this financial year will be  10 per cent lower but it has also said it will be able to hold its dividend distribution.

The dividend is key here. Telstra last year paid a fully franked 28¢  a share, offering an incredible 10 per cent yield without taking the franking credits into account. The stock is also trading on a price-earnings ratio of 8.9 times, so even with a fall in profit, it will  be  cheap compared with the rest of the market.

Of course the Telstra share price remains  way below any of the prices at which the government offloaded the business to mum-and-dad investors but those still holding these shares have already done a fair chunk of their money whatever they do from here. The issue for them is whether they should take the price on offer and sell now or hang on for the fat yield and possibly something better.

Telstra is not quite as bad an investment as it seems on the surface either, according to CommSec. The initial   share offer in 1997 was at $3.30, and CommSec calculates that the company has since paid dividends of $3.45 a share, offering a return of 90 per cent over the 13 years. Maybe it’s best not to do the calculation on the $7.40 a share at which T2 was offloaded in 1999. 

But there’s more to this change in sentiment  than just the dividend story. There is also a feeling that chief executive David Thodey and his management team have finally embarked on a real transformation of this giant of a business.

According to telecommunications consultant Paul Budde, there may be two tough years ahead but Telstra will emerge  a lean, mean corporate fighting machine.

‘‘Telstra has got to go through the transformation, and it’s going to cost money and could hurt its share price, but once it’s taken the medicine it can then prepare for a much brighter future,’’ Mr Budde says. ‘‘David Thodey is making the right decisions — he’s definitely on the right track.’’

Austock senior client adviser Michael Heffernan had been advising his clients to give Telstra a wide berth for quite some time. ‘‘I’m telling them now to keep holding it and take the dividend,’’ he says. ‘‘Plus the other positive is that Telstra is going to be a lot more aggressive in fighting against its competitors, particularly the smaller internet providers who have been winning business from them with cheap rates — that’s going to stop.’’

Mr Heffernan says it’s this business transformation that  means  Telstra’s future looks bright.    ‘‘I think Telstra is in a good situation irrespective of who  gets the job [in Canberra] — if the Liberals get it, they will free up the sector and do something, and if Labor makes it and the NBN goes ahead, Telstra gets $11 billion.’’

Intersuisse head of research Peter Russell believes a Labor victory would be better, at least initially, for Telstra because there would be less uncertainty about its future and Telstra will get the $11billion for the sale of its copper network into the NBN (that’s worth almost $1 a share for shareholders).

‘‘It’s a decaying asset and it’s in Telstra’s interest to have it all happen,’’ he says. ‘‘It’s like when you sell a car — it’s better to sell it when it’s got four good wheels, even if you have to walk  a while.’’

Mr Russell is positive about the stock as he sees benefits to come as Telstra becomes more efficient and aggressive. ‘‘We have it as a useful balanced portfolio stock — it’s got a pretty good yield and, at this price, it’s probably worthwhile.’’

Maybe Telstra’s long-suffering shareholders will finally get something to smile about.

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