Telstra Group Ltd (ASX: TLS) shares are a very popular for income investors.
The telco giant is widely regarded as one of the more generous dividend payers on the Australian share market.
As a result, its shares feature in countless income portfolios across the country. But should income investors be buying its shares today?
Let's take a look at what could happen to the Telstra dividend in the coming years.
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What are analysts saying about Telstra?
Goldman Sachs has been busy looking over the company's half year results release. It was pleased with what it saw, stating:
Key positives: (1) Strong 1H25 EBITDA, with beats across all key segments. We outline a range of sequential benefits into 2H25 which should more than offset headwinds, reiterating our confidence of TLS achieving the top half of its A$8.5-$8.7bn EBITDA guidance (GSe A$8.62bn); (2) DPS growing +6% to 9.5¢ (in-line with GSe) and the announced $750mn on-market buyback are both positive, with the buyback earlier than we expected.
In our view this signals both TLS's intent to return capital to shareholders, alongside its positive view on its ability to generate strong cashflow growth; (3) Despite market concerns around Jan/Feb mobile trading, given Vodafone promotional activity and TPG/Optus MOCN launch, TLS noted subscriber trends remained strong YTD with minimal impact on porting data since the MOCN went live. We highlight TLS/Optus mobile net adds in 1H25, reinforcing our cautious view on TPG postpaid subs in the Dec-24 half.
Telstra dividend forecast
In light of the above, let's see what Goldman Sachs is saying about the Telstra dividend.
As a reminder, the company declared a fully franked interim dividend of 9.5 cents per share with its half year results this week.
Goldman Sachs is expecting another 9.5 cents per share dividend with its full year results, bringing its total payout to 19 cents per share for FY 2025. This will be an increase of 5.5% on FY 2024's dividend and equates to a dividend yield of 4.6%.
The broker then expects another 1 cent per share increase in FY 2026, bringing its dividend to 20 cents per share. This would mean a fully franked 4.8% dividend yield.
And just like clockwork, a further 1 cent per share dividend increase is forecast in FY 2027, taking the Telstra dividend to 21 cents per share. If this proves accurate, it will mean a generous 5% dividend yield for income investors.
As well as these attractive dividend yields, Goldman Sachs sees value in Telstra's shares at current levels. It has retained its buy rating and $4.50 price target this morning, which implies potential upside of 8.7%.
