Top ASX dividend stock Telstra Group Ltd (ASX: TLS) continues to be an impressive source of passive income year after year.
Recently, the business has returned to growing its dividend payments for shareholders, which is a welcome development in this era of higher inflation.
Businesses that pay high and growing dividend yields could be exactly what income-seeking investors are looking for.
Buying the right amount of Telstra shares could deliver $100 per month, with the telco generating an impressive level of defensive earnings each year.
Telstra doesn't pay its dividend every month, so we'll think about the passive income in annual terms.
Generating $100 of passive income per month from Telstra shares
$1,200 per year in dividends is a pleasing amount of dividends.
Telstra's latest half-year dividend was 9 cents per share. According to Commsec, Telstra is projected to pay an annual dividend per share of 19 cents in FY25, which translates into a fully franked dividend yield of around 5% and a grossed-up dividend yield of 7.1%. That's an impressive starting yield, in my view.
The Commsec estimate also suggests the ASX dividend stock could grow its annual payout to 20 cents per share in FY26.
However, I'm going to focus on the FY25 numbers for this situation.
If we just look at the cash payments rather than the grossed-up income, we'd need to buy 6,316 Telstra shares to receive $1,200 of annual passive income.
If someone were trying to generate $1,200 of grossed-up dividend income, they would need to buy 4,422 Telstra shares for the right amount of FY25 passive income.
How much would this cost?
At the current Telstra share price, buying 6,316 shares would cost around $24,000.
If someone were targeting 4,422 shares instead, the total investment would take around $17,000.
Can the ASX dividend stock's payout keep increasing?
The ASX telco share wants to grow its dividend for investors if it can.
There are at least two strong tailwinds that can help it deliver growing profit and fund larger payouts.
First, its mobile subscriber numbers keep increasing. Spreading more users across the same infrastructure is a helpful way to improve margins. In the FY24 half-year result, the company reported it grew its total subscriber numbers by 625,000 year over year, representing an increase of 4.6% in percentage terms.
The other tailwind I'll point to is the ongoing mobile price increases. The company recently announced price increases of between $2 and $4 per month for prepaid and postpaid mobile plans. It justified the increase by noting that the company needs to keep investing in its network, and its network traffic is growing by 20% per annum. Higher revenue can help profit and dividend growth with this ASX dividend stock.
