Are Telstra shares still ASX dividend heavyweights?

Is it still worth holding the telco’s shares for the dividends? We take a closer look.

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Key points

  • For decades, Telstra was a dividend royalty on the ASX
  • After savage dividend cuts a few years ago, Telstra reemerged as a dividend favourite over the pandemic
  • It's currently offering a fully franked dividend yield of 4.13%

For decades, the Telstra Corporation Ltd (ASX: TLS) share price was a top choice for ASX dividend income investors on the ASX. A mature, monopolistic business model with a high payout ratio policy, what was there not to like?

But Telstra’s days of offering 7%, fully franked dividends came to an unceremonious end back in 2017. That was when the telco announced a big haircut to its cherished dividend. At the time, this saw a steep decline in the value of Telstra shares. To illustrate, Telstra was being priced at close to $7 a share in early 2015. But by mid-2018, the telco was down to under $3 a share.

But in the years since then, Telstra has arguably managed to salvage some of its reputational former glory when it comes to dividends. Telstra is still not paying anything close to the dividends it used to in raw terms. But the telco has kept its payouts steady for the past few years, including during 2020.

This was crucial for investors. For most of 2020, Telstra shares were being priced around the $3 mark, with some swings thrown in. The telco kept its dividend steady at 16 cents per share, fully franked, over the year of the pandemic. As such, investors enjoyed a rough dividend yield of 5% or so.

This would have been invaluable for income investors, who watched as many other ASX dividend heavyweights, including all four of the big banks, slashed their payouts.

But now we are in 2022, and the worst of the pandemic lockdowns are behind us (touch wood), is Telstra still a dividend share heavyweight on the ASX?

Are Telstra shares still worth considering for dividend income?

Well, the Telstra share price has steadily recovered from its 2020 lows, although it has saged somewhat over 2022 thus far.

At the close of trading on Thursday, Telstra was going for $3.86 a share. At this share price, its still-standing 16 cents per share in annual payouts mean Telstra is offering a fully franked dividend yield of 4.13% on current pricing.

That is certainly nothing to turn one’s nose up against. Especially considering 4.13% grosses-up to 5.9% with that full franking.

Saying that, Telstra certainly doesn’t stand as high above the ASX dividend pack as it used to. The company’s yield is still beating out Commonwealth Bank of Australia (ASX: CBA) at the moment. But it is now trailing the other big four banks.

Australia and New Zealand Banking Group Ltd (ASX: ANZ) currently has a trailing yield of more than 6%. ANZ has also suffered a near 20% drop in value over the past 12 months, so it’s not all roses and rainbows.

The big miners like BHP Group Ltd (ASX: BHP) and Fortescue Metals Group Limited (ASX: FMG) have been catapulted past Telstra in the dividend stakes in recent years too, fuelled by record-high iron ore prices. BHP’s trailing dividend yield is still over 10% right now.

But all in all, Telstra remains a solid ASX dividend paying share offering an above-average income stream on the ASX 200. Income investors value consistency with their payouts just as much as a high yield, so that counts for something too.

 

Motley Fool contributor Sebastian Bowen has positions in Telstra Corporation Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Corporation Limited. 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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