If you're looking for a steady source of passive income, several brokers suggest checking out Telstra Group Ltd (ASX: TLS).
With Telstra shares currently swapping hands at $3.86, the company trades on a trailing dividend yield above 4.6% at the time of writing.
But analysts expect more from the telco giant in the coming years, opening up the floodgates for those chasing fat, chunky dividends to sink their investment fangs into.
Let's take a closer look.
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Telstra shares for passive income?
Telstra has a strong history of paying dividends, making it popular with investors wanting consistent passive income.
It has returned capital from its profits to shareholders every single year since at least 2004, marking this as the 20th consecutive year.
Analysts at Goldman Sachs back Telstra's dividend growth in the coming years. Goldman likes the telco giant's "low-risk earnings (and dividend) growth", setting the stage for a growing stream of income for investors.
The broker forecasts fully franked dividends of 19 cents per share in FY25 and 20 cents in FY26.
At the current share price, these equal forward yields of about 4.9% and 5.1%, respectively. It also values the stock at $4.35 apiece.
Consensus, on the other hand, is looking at dividends of 18 cents and 19 cents apiece over the coming two years as potential passive income.
As such, Goldman projects headroom for both capital growth and current income. The broker expects Telstra's recovery to also boost earnings, in turn boosting passive income for investors.
Growth also on the cards
While these projections are great, a growth in passive income to shareholders must be funded from somewhere.
Typically, firms pay dividends as a percentage of their profits as part of their dividend policy.
Telstra is looking to monetise its InfraCo Fixed assets, which Goldman Sachs estimates could add between $22 billion and $33 billion in value to the business.
In addition, the telco's chair mentioned in the AGM that it would support any move to sell its stake in Foxtel alongside its partner in the venture, News Corporation (ASX: NWS).
This prompted speculation for a special dividend last month. Whether or not this will be passed through to shareholders isn't clear.
Foolish takeaway
For investors hunting passive income, experts say Telstra offers a blend of high yields and smart growth initiatives.
The telco giant is looking to free up value for shareholders, aiming for capital growth and current income.
If successful, brokers say the stock could be worth north of $4.30 apiece. It could also pay dividends of up to 20 cents per share this year.
In the last 12 months, the stock is down more than 2.5%.
