The Telstra Group Ltd (ASX: TLS) share price has delivered a pleasing performance this year, rising by 21% in 2025. I don't know what will happen next with the share price, but the passive income could continue to be pleasing.
I regularly like to say that investors shouldn't invest in an ASX share solely based on the passive income. But, the dividend potential can be a key focus as long as the valuation makes sense too.
When it comes to dividends, there are two elements I'd keep in mind, starting with reliability.
Can the dividend be consistent?
There are some ASX dividend shares that are more vulnerable to economic shocks than others, such as ASX retail shares and ASX mining shares.
Other companies have defensive earnings because customers/clients/subscribers are likely to continue paying for the product or service even in a downturn.
Telstra's network and other businesses provide households and business customers with access to the internet, which seems integral these days.
Even if there is an economic downturn, I don't think Telstra's mobile earnings would noticeably suffer. With that in mind, I believe the ASX telco share's dividend can remain resilient for the foreseeable future. But, I wouldn't just want a flat dividend.
Will the passive income grow?
Dividends are not guaranteed to grow, indeed passive income payments are not guaranteed at all.
But if profit can rise, then the payout can grow too. There are multiple drivers for Telstra's bottom line, in my view.
First, Telstra's leading network is attracting tens of thousands of new subscribers every six months. This helps drive revenue and helps spread the cost of the network across more users, boosting margins.
Second, the company's market position is giving management the confidence to continue hiking prices for mobile users. This is helping the business increase its average revenue per user (ARPU), making each user more valuable.
Third, I'm expecting Telstra's profit margins to rise in the coming years as it becomes larger thanks to operating leverage.
In the HY25 result, the company reported total income growth of 0.9% and net profit for shareholders growth of 6.5%. This helped the dividend per share rise by 5.6%.
Is the Telstra share price a buy?
The broker UBS thinks Telstra could pay an annual dividend per share of 21 cents in FY26 and generate earnings per share (EPS) of 22 cents.
This means the business is valued at 22x FY26's estimated earnings with a possible grossed-up passive income yield of 6.1%, including franking credits.
UBS is expecting Telstra's EPS to grow by 32% between FY26 and FY29. I think it's one of the most attractive ASX blue-chip shares to buy for passive income, even if it's not as cheap as it was at the start of the year.
