Why are Telstra shares sinking today?

What's going on with the telco giant's shares? Let's find out.

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Telstra Group Ltd (ASX: TLS) shares are out of form on Wednesday and sinking into the red.

In morning trade, the telco giant's shares fell 3.5% to $4.01.

A man holds his head in his hands, despairing at the bad result he's reading on his computer.

Image source: Getty Images

Why are Telstra shares under pressure?

There are a couple of reasons for today's decline.

The first is broad market weakness following a poor night of trade on Wall Street. This has seen the benchmark ASX 200 index drop 0.5% on Wednesday.

The other reason for the decline could actually be classed as good news for owners of Telstra shares.

That's because the company's shares are trading ex-dividend this morning for its latest payout.

When this happens, it means that the rights to an upcoming dividend are settled and new buyers of its shares will not be eligible to receive the payout on pay day. Instead, the dividend will be paid to the seller even though they no longer own the shares.

In light of this, a company's shares will usually drop to reflect this. After all, if you are buying shares, you don't want to pay for something you won't receive.

The Telstra dividend

Last week, Telstra released its half year results and revealed a 0.9% increase in total income to $11.8 billion and a 6% lift in underlying EBITDA to $4.25 billion. This was driven by underlying EBITDA growth across its Mobiles, InfraCo Fixed, Fixed – C&SB, Fixed – Enterprise, and International businesses.

In light of this profit growth, the company's board elected to increase its fully franked interim dividend by 5.6% to 9.5 cents per share.

Based on yesterday's close price of $4.16, this equates to a fully franked 2.3% dividend yield.

It is this dividend that will be heading to eligible shareholders in the future. But when? Let's find out.

Dividend pay date

Telstra shareholders can look forward to receiving this 9.5 cents per share fully franked dividend in a touch over a month on 28 March.

After which, according to a note out of Goldman Sachs, its analysts expect another 9.5 cents per share dividend to be declared with its full year results, bringing the total to 19 cents per share for FY 2025.

The broker then expects an increase to 20 cents per share in FY 2026 and 21 cents per share in FY 2027.

Goldman currently has a buy rating and $4.50 price target on the telco giant's shares.

Motley Fool contributor James Mickleboro 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.

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