The Telstra dividend yield has exploded recently. Here's why

Suddenly, investors can get a lot more dividend bang from their bucks with Telstra.

| More on:
A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

An interesting development has been occurring with Telstra Group Ltd (ASX: TLS) shares of late. If you can guess from the headline, it involves this ASX 200 telco and blue-chip share's dividend yield.

Telstra shares have always been famous for their dividends. The telco first listed on the ASX in the late 1990s after being privatised, and has been funding generous dividend payments for its investors ever since.

However, the dividend yield in Telstra shares has exploded over the past three months. Back on 20 June, the telco offered up a dividend yield of 3.85%. Telstra's dividends always come fully franked, so that yield grosses up to a healthy 5.5%, including the value of those franking credits.

Today, however, those same Telstra shares come with a dividend yield of 4.43%, or 6.33% grossed up.

So how has Telstra's yield increased by 15% in just three months?

What's up with Telstra shares' dividend yield?

Well, to get this out of the way, it's got nothing to do with the company's raw dividends themselves. Both of those yields are built upon Telstra's dividend payments of 17 cents per share that the telco has paid out over the past 12 months.

That's made up of the 8.5 cents per share interim dividend that was paid out back in March, as well as the final dividend of 8.5 cents per share that investors are set to receive later this month on 28 September.

But a company's dividend yield doesn't just depend on the raw dividend payments a company pays out. It's also a function of a company's share price too.

Say a company trades for $10 a share and pays out an annual dividend of $1 per share. If you bought those shares for $10, then you would get a dividend yield of 10% on your investment. But if that company rises to $20 a share and doesn't change its raw dividend payouts. Then, buying those shares at $20 would give our investor a dividend yield of 5%.

This works in reverse too, and this is why Telstra's dividend yield has seemingly exploded over the past three months. That's because today, the telco is trading at $3.84 a share (at the time of writing). But back on 20 June, the company was asking $4.43 a share.

So investors have swapped a $4.43 share price and a 3.84% dividend yield for a $3.84 share price with a 4.43% dividend yield.

Share prices and dividends can cut both ways, as Telstra's experience over the past three months clearly shows.

Motley Fool contributor Sebastian Bowen has positions in Telstra Group. 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 recommended Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Dividend Investing

A miner in a hardhat and high visibility clothing makes a thumbs up symbol.
Resources Shares

4 reasons to buy Rio Tinto shares today

A leading expert forecasts strong growth potential for Rio Tinto shares.

Read more »

Loving senior couple at the swimming pool. Senior woman sitting on the edge of the pool and giving lemonade to her husband who is swimming.
Dividend Investing

How I'd invest $50,000 in ASX dividend shares for retirement, if I had to start from scratch

Here’s how I’d start building retirement income from square one.

Read more »

A man in a suit smiles at the yellow piggy bank he holds in his hand.
Dividend Investing

Forget Westpac and buy these ASX dividend shares to buy

Analysts think that these shares would be better than the big four banks.

Read more »

Man holding out Australian dollar notes, symbolising dividends.
Dividend Investing

How big will the BHP dividend be in 2026?

Let’s dig into the potential dividends from this mining giant.

Read more »

an attractive young woman with sad eyes holds a red paper love heart over her mouth as though she has been unlucky in love.
Dividend Investing

What I love about these 2 ASX dividend shares

There’s a lot to like!

Read more »

Two smiling work colleagues discuss an investment or business plan at their office.
Dividend Investing

5 ASX dividend stocks to buy and hold

Analysts think these shares could be top options for income investors.

Read more »

Woman holding $50 notes with a delighted face.
Dividend Investing

I think these 2 high-yield ASX dividend shares are buys in July

These businesses are very attractive for income investors.

Read more »

Cheerful boyfriend showing mobile phone to girlfriend in dining room. They are spending leisure time together at home and planning their financial future.
Dividend Investing

Buy these ASX dividend shares for passive income

Let's see what analysts are recommending as buys for a passive income portfolio.

Read more »