Are Telstra shares a good buy for dividend income today?

Telstra shares have delivered two fully-franked dividends per year for more than a decade running.

| More on:

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

Telstra Group Ltd (ASX: TLS) shares closed flat yesterday, trading for $3.81 apiece.

That puts shares in the S&P/ASX 200 Index (ASX: XJO) telco down 2% over the past 12 months, slightly outperforming the 2.1% loss posted by the ASX 200 over this same period.

So, with that retrace in mind, are Telstra shares a good buy now for their dividend income?

Telstra shares for dividend income?

When I'm looking for passive income stocks, one of the metrics at the top of my list is reliability.

On that score, Telstra shares get a big tick, having delivered two fully franked dividends per year for more than a decade running. And that includes the market-addled pandemic year of 2020.

By the way, that's another important metric I look for with ASX 200 dividend stocks, franking credits. This will offer most investors some handy tax credits when it's time to pay the ATO its dues.

So that's two ticks for Telstra shares' dividend income potential.

Other important metrics to consider are the profitability of the business, and whether dividends have been growing or shrinking.

On the performance front, for FY 2023 Telstra reported a 5.4% year on year increase in total income of $23.2 billion. And net profit after tax (NPAT) increased 13.1% to $2.1 billion.

That played out well for passive income investors.

The telco paid a final, fully franked dividend of 8.5 cents per share on 28 September. The interim dividend of 8.5 cents per share landed in eligible investors' bank accounts on 31 March.

That works out to a full-year payout of 17 cents per share, an increase of 3% from FY 2022.

At yesterday's closing price, this equates to a fully franked trailing yield of 4.5%.

What's next?

Of course, we're hoping to see some share price growth as well as dividend growth.

Following on the company's full-year earnings results, CEO Vicki Brady said the principle of Telstra's "capital management framework [is] to seek to grow our fully franked dividend over time".

On that front, Goldman Sachs has a bullish outlook on the ASX 200 telco.

The broker has a $4.70 price target on Telstra shares, representing a potential upside of 23% from current levels.

As for the passive income on offer, Goldman Sachs also sees that rising over the next two years. Its analysts are forecasting the telco's stock will deliver dividends of 18 cents per share in FY 2024, rising to 20 cents per share in FY 2025.

Goldman's bullish outlook stems from the "low risk earnings (and dividend) growth that Telstra is delivering across FY22-25".

Should you invest $1,000 in Xero Limited right now?

Before you buy Xero Limited shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Xero Limited wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 3 April 2025

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has positions in and 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

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

2 ASX dividend shares brokers rate as buys with 7% yields

These high yield shares could be great picks for income investors.

Read more »

Piggy bank at the end of a winding road.
Dividend Investing

Why this $44 billion ASX 200 dividend stock is pushing higher today

The ASX 200 dividend stock trades on a yield of 4.6%.

Read more »

Young girl drinking milk showing off muscles.
Dividend Investing

Up 41% in 2025, how this ASX 200 dividend stock is primed for 'continuing growth'

A leading expert expects ongoing growth from this high-flying ASX 200 dividend stock.

Read more »

A couple working on a laptop laugh as they discuss their ASX share portfolio.
Dividend Investing

Buy these ASX dividend shares for 3.5% to 8% yields

Income investors might want to check out these buy-rated shares.

Read more »

Family shopping for groceries
Dividend Investing

Should I buy Woolworths shares for the 4% dividend yield?

Woolworths shares even delivered two fully franked dividends during the pandemic-addled year of 2020.

Read more »

A happy older couple relax in a hammock together as they think about enjoying life with a passive income stream.
ETFs

Here's why it's a great day to own Vanguard ASX ETFs

Show us the money!

Read more »

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

Forget savings accounts and buy these ASX dividend shares

Analysts think these shares could be top picks for investors looking to beat falling rates.

Read more »

Happy man holding Australian dollar notes, representing dividends.
Dividend Investing

How to build a $500 per month income stream with ASX dividend shares

Let's see how you could make it possible on the share market.

Read more »