The Telstra Corporation Ltd (ASX: TLS) share price could be an option for income for investors to consider.
Telstra has been one of the biggest payer of dividends over the last decade with its generous dividend policy for shareholders.
The telco recently updated its dividend policy for investors, which indicated the board's thoughts and intentions about its payouts.
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Telstra's latest dividend policy
Under Telstra's new T25 strategy, it came out with an updated capital management framework. It included principles to maximise fully franked dividends and seek to grow them over time, to invest for growth and to return excess cash to shareholders.
Whilst delivering on its T25 goals, Telstra also said that it was confident in maintaining a minimum payment of a $0.16 fully franked dividend per share, as long as there are no unexpected material events and subject to the requirements of its capital management framework.
Telstra said that this principle of maximising dividends for shareholders recognised continued feedback from shareholders of the importance of fully franked dividends. It also reflects the company's intention to return as much cashflow as can be supported by earnings, whilst balancing the objectives and principles of its capital management.
At the current Telstra share price, the $0.16 per share annual dividend translates to a grossed-up dividend yield of 5.6%.
This policy replaced the previous one of paying fully franked dividends of 70% to 90% of underlying earnings. That's because the company is expecting cashflow to remain ahead of accounting earnings and it's focused on growing.
What are the T25 goals?
T22 has been the focus for the last few years, which included cost cutting, restructuring and asset sales.
T25 involves extending 5G network coverage to 95% of the population, expanding regional coverage with both 4G and 5%, growing Telstra Plus members to 6 million by FY25, finding $500 million of further net fixed costs by FY25, profit growth and achieving more access to towers.
The profit growth target to FY25 is compound annual growth of mid-single digit underlying earnings before interest, tax, depreciation and amortisation (EBITDA) and high-teens compound annual growth of underlying earnings per share (EPS).
Is the Telstra share price good value?
Credit Suisse thinks so, with a price target of $4.40 on the business with reference to how Telstra wants to keep its mobile competitive advantage in Australia.
However, UBS is just 'neutral' on the business with a price target of $4, though the broker does think the telco is turning things around.
