$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

Australian dollar notes in the pocket of a man's jeans, symbolising dividends.
Share Market News

Buy these excellent ASX dividend shares for 5%+ yields

Analysts expect above-average dividend yields from these shares.

Read more »

farm workers examine an agricultural crop
Dividend Investing

Why I think this is a top ASX 300 stock to buy right now for passive income

Rural Funds can provide investors with a lot of income at the current valuation.

Read more »

A couple sit in front of a laptop reading ASX shares news articles and learning about ASX 200 bargain buys
Dividend Investing

1 ASX dividend stock down 40% I'd buy right now

This business could be a very good choice for healthy dividends.

Read more »

Happy young woman saving money in a piggy bank.
Dividend Investing

How to make $10,000 of passive income a year

Here's how to make the share market your own personal ATM.

Read more »

Blue chips with stock written on them.
Dividend Investing

2 ASX blue-chip shares offering big dividend yields

These businesses have a lot to offer income-focused investors.

Read more »

Woman laying with $100 notes around her, symbolising dividends.
Dividend Investing

How much dividend income does the average ASX investor earn?

It's an impressive amount!

Read more »

Person holding Australian dollar notes, symbolising dividends.
Dividend Investing

Which ASX 200 sector paid the best dividends in FY25?

We reveal the dividend returns of each of the 11 market sectors in FY25.

Read more »

A young woman sits at her desk in deep contemplation with her hand to her chin while seriously considering information she is reading on her laptop.
Dividend Investing

Are CBA shares still a good buy today for passive income?

Looking to earn passive income from ASX dividend stocks? Here’s my take on CBA shares.

Read more »