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Broker sees 19% upside for Telstra (ASX:TLS) share price and 4% dividend yield

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Earlier today the Telstra Corporation Ltd (ASX: TLS) share price dropped to a 2022-low of $3.80.

When the telco giant’s shares hit that level, it meant they were down a sizeable 10% since the start of the year.

Is the weakness in the Telstra share price a buying opportunity?

One broker that is likely to see the weakness in the Telstra share price as a buying opportunity is Morgans.

A recent note reveals that the broker has an add rating and price target of $4.56 on the telco giant’s shares.

Based on the current Telstra share price of $3.82, this implies potential upside of 19% for investors over the next 12 months.

But that doesn’t include the dividends that the broker is expecting Telstra to distribute. It continues to expect Telstra to pay a fully franked 16 cents per share dividend in FY 2022.

And while you may be too late for its interim dividend for FY 2022, which is in the process of being paid, don’t worry because this time next year Morgans expects Telstra to be preparing another interim dividend of the same value.

So, if we include this dividend into the equation to give us a 12-month yield of 4.2%, the total return on offer stretches to over 23%.

What did the broker say?

Morgans has previously stated that its positive view on the Telstra share price is underpinned by improving industry dynamics and its belief that the telco is undervalued on a sum of the parts (SOTP) basis.

It commented: “Industry dynamics have turned positive (NBN and mobile prices are increasing after 5 years of decline; TLS’s targets imply they continue to rise). The SOTP for TLS is worth more than the current share price (and steps to release this value are underway; albeit timing is unclear).”

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