How much income will Telstra shares pay for FY22 after this month's dividend hike?

What kind of dividend income can investors expect from Telstra shares?

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Key points

  • Telstra was one of the ASX 200 shares that surprised investors this earnings season
  • Telstra announced a surprise dividend hike earlier this month
  • So let's look at what kind if income investors can now expect from the telco

Of all of the ASX 200 shares to report their full-year earnings so far this earnings season, few have arguably surprised as much as Telstra Corporation Ltd (ASX: TLS) shares.

When the ASX 200 telco reported its full-year earnings on 11 August, Telstra revealed a 4.7% fall in revenues to $22.045 billion, but an 8.4% rise in underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to $7.256 billion.

But perhaps the biggest surprise of them all was Telstra's dividend announcement. The telco revealed that it would be increasing its final dividend for FY22 by 6.25% to 8.5 cents per share.

This was the first time Telstra has raised its dividend since early 2015. At that time, the company dialled up its final dividend from 15 cents per share to 15.5. But that was a long time ago, and a very different Telstra.

In more recent years, investors have become used to the telco cutting its dividend. That's what happened repeatedly between 2017 and 2019. In fact, before this announcement, Telstra had paid an 8 cents per share dividend like clockwork.

So this month's announcement was certainly a big deal.

Telstra's first dividend hike in seven years

So now we have Telstra paying out a fully franked final dividend of 8.5 cents per share, to be doled out on 22 September. That means that the company will have paid shareholders a total of 16.5 cents per share for FY2022. On the current Telstra share price, this will give the telco an FY22 dividend yield of 4.1%, or 5.86% grossed-up with the full franking.

So if an investor had a hypothetical $10,000 invested in Telstra shares today, they can expect to receive a total of approximately $410 in dividend income for FY22.

If Telstra follows this dividend up with another 8.5 cents per share payment for its next dividend (which is by no means guaranteed), the company would have a forward yield of 4.23% on current pricing.

But one broker who reckons this could indeed play out is Morgans. As my Fool colleague James covered this week, Morgans was impressed with Telstra's FY22 earnings report.

The broker slapped an "add" rating on Telstra shares, complete with a 12-month share price target of $4.60. When it comes to dividends, Morgans is pencilling in 17 cents per share over FY23 for Telstra, and again in FY24.

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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