The Telstra (ASX:TLS) dividend yield is 8 times greater than term deposits

The Telstra Corporation Ltd (ASX:TLS) dividend yield is more than eight times greater than National Australia Bank Ltd (ASX:NAB) term deposits…

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At present, National Australia Bank Ltd (ASX: NAB) is offering interest rates of just 0.6% on 12-month term deposits. This is broadly in line with what the rest of the banks are offering.

This means that even if you were to invest $1 million into these term deposits, you would receive just $6,000 of income per annum.

That’s clearly not sufficient for an income to live from.

Luckily, there are plenty of dividend shares on the Australian share market offering far greater yields.

One example of this is Telstra Corporation Ltd (ASX: TLS).

This telco giant has certainly had a few tough years, but its outlook is now improving greatly. This is thanks to its T22 strategy and the NBN rollout progress.

In respect to the former, Telstra’s strategy is simplifying its business and cutting costs materially. This includes potentially splitting into three separate entities, with the aim of taking advantage of potential monetisation opportunities for its infrastructure assets.

One broker that is pleased with this plan and believes Telstra is well-positioned for a return to growth in the not so distant future is Goldman Sachs. Its analysts recently reiterated their buy rating and $3.75 price target on its shares.

They also believe Telstra will pay a 16 cents per share dividend for the foreseeable future. Based on the current Telstra share price, this represents a fully franked 5.1% dividend yield.

This is more than eight times greater than the term deposits on offer from NAB.

What did Goldman say?

Commenting on its plan to split into three, Goldman said: “We believe the update from Telstra will be viewed positively, given: (1) it reflects a greater willingness to monetize its attractive infrastructure assets to create shareholder value; and (2) underlying earnings trends, particularly in mobile, which looks to be trending favorably, supporting the improved FY23 ROIC target.”

“This supports our positive view on Telstra, which continues to be predicated on: (1) A positive mobile inflection approaching, which typically drives outperformance; (2) The 16cps dividend is a sustainable, and could be supplemented by meaningful TowerCo proceeds; and (3) Significant Infrastructure value, which could be crystallized over time as we head towards NBN privatization,” it added.

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Motley Fool contributor James Mickleboro 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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