TELSTRA shares closed at $3.54 yesterday - the highest price since December 2009 - as investors seek out defensive equities and the returns on cash deposits look likely to fall.
The increase comes after confirmation that Telstra would maintain dividends at 28? for two years and keep aside billions of dollars in excess free cash flow from its deal with NBN Co for a possible dividend increase after 2014.
Shares hit $3.51 during trading and surged to $3.54 during settlement, a 7? rise on Wednesday's closing price.
Telstra hit historical lows of $2.79 last August amid fears it would not complete the deal with NBN Co.
The chief executive of Telstra, David Thodey, said last week it would consider increasing dividends in 2014 when it had enough franking credits, or conduct an on-market share buyback.
The telco finalised a deal with NBN Co on March 7. It valued the deal at $11 billion in 2010 and last week revealed it would take in $2 billion to $3 billion in excess cash flow over the next two to three years and, with regular annual payments from 2015 onwards.
That news also cements Telstra's position as one of the highest-yielding stocks on the market of about 8.75 per cent.
This was particularly attractive in light of low inflation figures released on Tuesday, which increase the chances of a cash rate cut next week. This would reduce interest rates on cash term-deposits. Overseas investors have become newly interested in Telstra recently because of its unusually high yield, according to analysts.
A senior private client adviser with RBS, Geoff Voller, said his domestic clients had been looking for or switching to low-risk defensive shares over the past four to six weeks.
"And following the NBN deal and some really impressive presentations by David Thodey, I think people are starting to get a lot of confidence that the Telstra business model is a good one," Mr Voller said.
- A full bench of the Federal Court will release its judgment this morning on an appeal from Telstra, the AFL and the NRL against a decision allowing Optus to sell a mobile television service. The three parties had argued that allowing customers to record and watch television in near-live conditions on mobile phones and tablets breached an exclusive licensing deal between the sports bodies and Telstra.