For some time now, one of the most popular options out there for income investors has been Telstra Group Ltd (ASX: TLS).
The telco giant features in countless income portfolios and super funds across the country.
This isn't overly surprising given its defensive earnings and the Telstra board's decision to regularly share a good portion of these profits with its shareholders each year in the form of dividends.
For example, in FY 2024, Telstra's improving financial performance allowed the board to declare fully franked dividends of 9 cents per share for both its interim and final payouts. This brought its total to 18 cents per share, which was up 5.9% from 17 cents per share year on year.
This means that the company is returning over $2 billion to shareholders this year.
To put that into context, this is more than the market capitalisations of Domain Holdings Australia Ltd (ASX: DHG) and Corporate Travel Management Ltd (ASX: CTD).
And while Telstra's final dividend for FY 2024 has not yet been paid, it is too late to qualify for this payout. So, what's next for shareholders? Let's see what analysts are forecasting in the coming years.
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Telstra dividend forecast
According to a note out of Goldman Sachs, its analysts are expecting Telstra's dividend to continue to grow in FY 2025.
The broker is forecasting a fully franked 19 cents per share dividend. Based on the current Telstra share price of $3.93, this will mean a 4.8% dividend yield.
This trend is expected to continue in FY 2026, with Goldman pencilling in another one cent increase to 20 cents per share. This equates to a fully franked 5.1% dividend yield.
Finally, in FY 2027, the broker expects another one cent increase in the Telstra dividend to 21 cents per share. This would mean a dividend yield of 5.35% for income investors.
Should you buy Telstra shares?
The note reveals that Goldman has a buy rating and $4.35 price target on Telstra's shares. This implies potential upside of almost 11% for investors over the next 12 months.
And combined with its prospective dividend yield, the total potential return stretches to approximately 15.5%.
Commenting on the company and its buy recommendation, the broker said:
We believe the low risk earnings (and dividend) growth that Telstra is delivering across FY22-25, underpinned through its mobile business, is attractive. We also believe that Telstra has a meaningful medium term opportunity to crystallise value through commencing the process to monetize its InfraCo Fixed assets – which we estimate could be worth between A$22-33bn. Although there is some debate around the strategic benefits, we see a strong rationale for monetizing the recurring NBN payment stream, given its inflation linked, long duration cash flows could be worth $14.5bn to $17.9bn, with no loss of strategic benefit.
