The Telstra Corporation Ltd (ASX: TLS) dividend has been a staple of Aussie share portfolios for decades. Telstra has been known as a top income-earning stock since listing on the ASX back in 1997.
So, despite some recent troubles, is Telstra still considered a blue-chip dividend stock in 2019?
The Telstra dividend history
Telstra has long had a policy of paying out close to 100% of its underlying profit to shareholders. As recently as 2016, Telstra was paying out a tidy 31 to 32 cents per share to its investors.
Telstra CEO Andy Penn changed that policy to a target range of 70–90% of underlying profit back in 2017.
These cuts came as Telstra was struggling in the face of increased competition from NBN Co. and the rollout of the National Broadband Network.
Telstra shares are currently yielding 2.81% after slashing its shareholder payout by 27% to 16 cents per share.
A disappointing FY19 full-year result saw profit plunge 40% and Telstra announce further dividend cuts. This included a $600 million drag on earnings from the NBN as the company continues to cut costs.
Are there positives for Telstra?
I think the Telstra share price could be a good value buy at its current level.
Telstra shares have climbed 28.52% since the start of January to outperform the S&P/ASX 200 Index (INDEXASX: XJO).
The biggest driver for the Telstra share price going forward should be its potential 5G network dominance.
With TPG Telecom Ltd (ASX: TPM) pulling out of the 5G race earlier this year, it could pave the way for a new era of Telstra dominance.
If Telstra can capitalise on the 5G network and put the NBN earnings hit behind it, this could spark a Telstra dividend recovery.
The Telstra dividend has been a bedrock of many ASX portfolios for decades.
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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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