If you own Telstra Corporation Ltd (ASX: TLS) shares, then you will no doubt be keen to hear what is happening with the telco giant's dividend following its full year results release this morning.
Well, I have some good news for you.
What's happening with the Telstra dividend?
Let's start at the beginning. This morning Telstra released its full year results and revealed a 4.7% drop in revenue to $22,045 million but an 8.4% increase in underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to $7,256 million
The latter was driven by a particularly strong result from its key mobile business, which reported EBITDA growth of 21.2% or $700 million over the prior corresponding period.
Pleasingly, management expects this strong form to continue and has guided to underlying EBITDA of $7.8 billion to $8.0 billion in FY 2023. This will mean year over year growth of 7.5% to 10%.
This strong form and its positive outlook have allowed the company's board to surprise the market with its first increase to the Telstra dividend in seven years.
Surprise dividend increase
Telstra will be paying shareholders a final fully franked dividend of 8.5 cents per share, which is up from 8 cents per share in the prior corresponding. This comprises a final ordinary dividend of 7.5 cents per share and a final special dividend of 1 cent per share.
Shares will trade ex-dividend for this on 24 August, with the payment expected to be made almost a month later on 22 September.
This final dividend took Telstra's total dividend for FY 2022 to a fully franked 16.5 cents per share. This includes 13.5 cents ordinary and 3 cents special, representing a total dividend payout of $1,919 million.
Commenting on the dividend payment, Telstra's outgoing CEO Andy Penn said:
This represents the first increase in the total Telstra dividend since 2015 and recognises the confidence of the Board following the success of our T22 strategy, the ambition in our T25 strategy of high-teens EPS growth from FY21 – FY25, the strength of our balance sheet and the recognition by the Board of the importance of the dividend to shareholders.
Where next for its dividend?
As you might have noticed above, the Telstra dividend comprises an ordinary dividend and a special dividend. The latter relates to payments from the NBN for infrastructure access and the disconnection and migration of customers during the rollout.
However, with the rollout now complete, this result marks the end of the NBN one-off related special dividend.
But the good news is that the team at Goldman Sachs doesn't expect this to lead to dividend cuts. Its analysts are forecasting a 17 cents per share dividend in FY 2023 and then an 18 cents per share dividend in FY 2024.
All in all, today could mark the beginning of a series of increases to the Telstra dividend over the remainder of the 2020s.
