The Telstra Group Ltd (ASX: TLS) share price has been a strong performer over the last three months.
During this time, the telco giant's shares are up a sizeable 16%.
This leaves them trading at $3.97, which is not too far away from their 52-week high.
Given that many see Telstra shares as a great option for dividend income, let's see what this recent rally means for its dividend yield.
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Telstra dividend yield
The good news for income investors is that decent dividend yields are still expected in FY 2025 and beyond.
For example, according to a note out of Goldman Sachs, its analysts are forecasting fully franked dividends per share of 19 cents in FY 2025, 20 cents in FY 2026, and 21 cents in FY 2027.
Based on the current Telstra share price, this will mean attractive dividend yields of 4.8%, 5%, and 5.3%, respectively.
To put that into context, a $10,000 investment would yield approximately $480, $500, and $530 of dividend income across the three years.
Is the Telstra share price good value?
As well as forecasting some attractive dividend yields, Goldman Sachs sees room for the Telstra share price to keep rising.
The note reveals that it has a buy rating and $4.35 price target on the company's shares. This implies potential upside of 9.6% for investors from current levels.
Combined with its expected dividends, this would mean a total potential 12-month return of over 14%.
Commenting on its buy recommendation, Goldman Sachs said:
Telstra is the incumbent telecom operator in Australia. We believe the low risk earnings (and dividend) growth that Telstra is delivering across FY22-25, underpinned through its mobile business, is attractive. We also believe that Telstra has a meaningful medium term opportunity to crystallise value through commencing the process to monetize its InfraCo Fixed assets – which we estimate could be worth between A$22-33bn.
Although there is some debate around the strategic benefits, we see a strong rationale for monetizing the recurring NBN payment stream, given its inflation linked, long duration cash flows could be worth $14.5bn to $17.9bn, with no loss of strategic benefit. Although at a headline level, Telstra valuation appears relatively full (vs. peers and vs. 10Y yield), we note: (1) Adjusting out NBN recurring payments (a unique asset), Telstra trades at a much more compelling multiple; (2) Although its yield spread is compressed vs. history, when factoring dividend growth this is more attractive. Hence in an uncertain 2024 we rate Telstra Buy.
