$12,000 of Telstra shares could make me $70 in monthly passive income!

How much dividend income can shareholders call on from Telstra?

| More on:
A happy man and woman sit having a coffee in a cafe while she holds up her phone to show him the ASX shares that did best today.

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

Owning Telstra Group Ltd (ASX: TLS) shares is typically a rewarding experience for passive income. In the last couple of years, the ASX telco share has paid shareholders a large and growing dividend.

The best thing about ASX shares is that they can provide a mixture of capital growth and income. That is why I believe investors seeking dividend income should focus on businesses that can grow earnings as well as dividends.

A rising profit is the best thing to help support long-term share price growth, in my opinion.

Let me show how owning $12,000 of Telstra shares can generate great passive income.

Dividend and earnings projection

We've seen the Telstra annual dividend per share grow from 16 cents per share in FY21 to 18 cents per share in FY24.

The broker UBS expects the Telstra board of directors to increase the annual dividend per share to 19 cents per share, which would represent a 5.6% increase year over year.

If Telstra did pay an annual dividend per share of 19 cents in FY25, it would equate to a fully franked dividend per share of 4.9% and a grossed-up dividend yield of 7%, including the franking credits.

UBS also predicts Telstra's net profit will increase to $2.15 billion in FY25, which would help fund a larger dividend.

Monthly income

If I invested $12,000 into Telstra shares, I'd currently be able to buy 3,076 Telstra shares.

For FY25, an annual dividend per share of 19 cents would translate into annual cash income of $584 and grossed-up dividend income of $834.

Translating that into a monthly figure, the grossed-up dividends would be approximately $70 per month. Excluding franking credits, the cash dividends would be around $49 per month.

This would just be the income in FY25. Broker UBS expects Telstra's annual dividend per share to grow to 21 cents per share in FY26, 23 cents per share in FY27, 24 cents per share in FY28, and 27 cents per share in FY29.

By FY29, owning 3,076 Telstra shares could yield $1,186 in grossed-up annual passive dividend income, or almost $100 per month.

UBS thinks the forecast dividend growth is "attractive", with a compound annual growth rate (CAGR) of 8% over the next three years.

The broker suggested there was "potential upside should we see a faster than expected contribution from InfraCo's intercity fibre project, as well as better than expected cost-out beyond FY25".

In other words, if Telstra's intercity fibre project makes earnings faster or if it cuts costs more than expected, profit and the dividend could grow faster than expected.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. 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 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

a mature aged couple dance together in their kitchen while they are preparing food in a joyful scene as the Breville share price rises on the back of a 25% profit surge
Dividend Investing

These cheap ASX dividend stocks could rise 25% to 40%

Analysts think these stock could generate big returns for income investors.

Read more »

A woman wearing glasses and a black top smiles broadly as she stares at a money yarn full of coins representing the rising JB Hi-Fi share price and rising dividends over the past five years
Dividend Investing

I'd buy 15,346 shares of this ASX 300 stock to aim for $150 a month of passive income

This business is a top contender for investment cash flow…

Read more »

A woman in a bright yellow jumper looks happily at her yellow piggy bank.
Dividend Investing

Forget CBA and buy these ASX dividend shares

Analysts think these picks would be better than the banking giant.

Read more »

A man smiles as he holds bank notes in front of a laptop.
Dividend Investing

Here's the Macquarie dividend forecast from top analysts through to 2027

This business has a promising dividend outlook. Let’s take a look…

Read more »

Happy woman and man looking at an iPad.
Dividend Investing

Forget term deposits! I'd buy these two ASX 200 shares instead

Term deposits aren’t as attractive to me these days.

Read more »

Man holding Australian dollar notes, symbolising dividends.
Dividend Investing

3 ASX dividend shares to buy with $7,000 and hold for a decade

Let's see why analysts think these shares would be great additions to an income portfolio.

Read more »

Woman relaxing on her phone on her couch, symbolising passive income.
Dividend Investing

Own IVV ETF or other iShares ASX ETFs? It's dividend payday for you!

Thinking TGIF? There's a better reason to celebrate. It's dividend payday for iShares investors!

Read more »

Hand holding Australian dollar (AUD) bills, symbolising ex dividend day. Passive income.
Bank Shares

This is the ASX bank stock with the largest dividend yield right now

Looking to ASX bank stocks for dividend income right now?

Read more »