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Telstra to raise dividend?

Telstra (ASX: TLS), Australia’s biggest telecommunications company is renowned for its 28-cent, fully franked dividend – but is it about to get bigger?

Telstra has been a favourite among investors and SMSFs for its safety and income, but recently the share growth has impressed the market even more. In the past year, the share price has risen a staggering 32% plus dividends.

Now that the company is funding dividends from cash flow and investing heavily into 4G networks, customer service and business solutions, investors may be getting wary that it has run its course. However, in October last year Chairman Catherine Livingstone announced that dividends would be considered on a half-yearly basis and hinted that the company is aiming to increase dividends.

The market is calling. Telstra is generating huge cash flow from its telecommunications businesses but also from its lucrative $11 billion contract with the NBNCo. Deutsche Bank analysts have predicted that dividends could reach 32 cents per share by FY14.

In addition, Morningstar predicts robust earnings, forecasting a bearish 1 cent increase in FY14 but a 31 cent payout by FY15.

Foolish takeaway

Investors will be cheering on an increased dividend payout and Telstra’s new liquidity position makes it likely. With interest rates low and expected to go lower, investors will take aim for stocks like Telstra, NAB (ASX: NAB) and Commonwealth Bank (ASX: CBA) for their high yields.

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Motley Fool contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies. 

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