Telstra to raise dividend?

The chairman hinted at it and now analysts are calling for an increased payout.

Owen Raszkiewicz

Owen Raszkiewicz is a Motley Fool Contributor. Owen has been a Contributor since 2013, having also spent time as a Fool writer/analyst. He also worked as an Investment Analyst at Zenith Investment Partners, Australia's top research house specialising in managed funds. Owen has appeared on Channel 10's The Project and was invited on the BBC. He holds a Masters of Applied Finance, Masters of Financial Planning, Bachelor of Technology, Advanced Diploma of Financial Services and Diploma of Mortgage Broking Management. In addition, Owen has passed Level 1 of the Chartered Financial Analyst (CFA) Program. He has taken the Banking + Finance Oath (BFO). When he is not writing, Owen is Managing Director of Rask Finance, an Australian financial education company. You can email him: [email protected].

Published August 2, 2013 8:03 am AEST

Telstra (ASX: TLS), Australia's biggest telecommunications company is renowned for its 28-cent, fully franked dividend – but is it about to get bigger?

Telstra has been a favourite among investors and SMSFs for its safety and income, but recently the share growth has impressed the market even more. In the past year, the share price has risen a staggering 32% plus dividends.

Now that the company is funding dividends from cash flow and investing heavily into 4G networks, customer service and business solutions, investors may be getting wary that it has run its course. However, in October last year Chairman Catherine Livingstone announced that dividends would be considered on a half-yearly basis and hinted that the company is aiming to increase dividends.

The market is calling. Telstra is generating huge cash flow from its telecommunications businesses but also from its lucrative $11 billion contract with the NBNCo. Deutsche Bank analysts have predicted that dividends could reach 32 cents per share by FY14.

In addition, Morningstar predicts robust earnings, forecasting a bearish 1 cent increase in FY14 but a 31 cent payout by FY15.

Foolish takeaway

Investors will be cheering on an increased dividend payout and Telstra's new liquidity position makes it likely. With interest rates low and expected to go lower, investors will take aim for stocks like Telstra, NAB (ASX: NAB) and Commonwealth Bank (ASX: CBA) for their high yields.

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Motley Fool contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies.

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