Telstra Group Ltd (ASX: TLS) shares continue to rise as shareholders are rewarded with a strong yield and a fresh buyback.
While the S&P/ASX All Ordinaries Index (ASX: XAO) has struggled in 2025, with returns of only 1.3% so far this year, Telstra has been one of the quiet performers.
It might not have the glamour of a high-flying tech company, but this blue-chip telco has been quietly rewarding shareholders.
Telstra shares are up 12% so far this year, and there is certainly some buzz around the company at the moment.
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What's driving the excitement?
Under CEO Vicki Brady, Telstra has been slowly rationalising its cost base and increasing its free cash flow.
That has given the Board confidence in returning excess cash to shareholders, and the company delighted its shareholders when it announced a bumper $750 million on-market share buyback in February. That sent the stock soaring, and even at the current share price, investors are still getting a 4% dividend yield to boot!
It's no wonder Telstra has been one of the ASX's most reliable dividend-paying shares and a core holding for many retirees and dividend-seeking investors.
Can Telstra shares keep rising higher?
I think Telstra has far greater scope to continue cutting costs while also benefiting from significant demand for digital infrastructure. These twin engines will continue to support Telstra's ability to increase its dividends to shareholders.
The risk, however, is that we don't know to what extent Telstra could be kicking the can down the road on its capex program. Telstra is in a very capital-intensive business with an unrelenting need for more and more capital expenditure.
It's a double-edged sword. The capex is what sustains Telstra's ability to maintain its competitive advantage, but it comes at a cost and with long payback periods.
Ultimately, we know what Telstra is. In a world where yield is hard to come by and growth stocks trade on shaky valuations, Telstra offers something different – defence and predictability.
It's never going to shoot the lights, so growth investors won't like it, but it's easy to see why dividend-focused investors love it.
I think Telstra is well-positioned to continue growing its dividend. The share price won't be a top performer every year, but it's a sweet bonus for loyal shareholders when it does happen, as has been the case so far in 2025.
