Telstra Group Limited (ASX: TLS) shares closed 0.61% lower on Wednesday afternoon, at $4.92 a piece. For the month, the shares are 0.41% higher, and they're now 25.83% higher than this time last year.
Right now, I believe the leading Australian telecommunications and technology company is a screaming buy. Here's why.
Image source: Getty Images
1. Telstra's dividends provide a reliable passive cashflow
Telstra has a reputation for handing out large and regular fully franked dividend payments to its shareholders. It's known for being one of the most reliable options on the index, which is great for any investor seeking a passive income. Telstra has paid out a steadily increasing dividend yield for several years, including during the COVID pandemic period.
Commsec analysts have forecast that Telstra will pay an annual dividend per share of around 20 cents in FY26. That translates to a grossed-up dividend yield of 5.6%, including franking credits.
UBS thinks this could be even higher. The broker is currently forecasting that Telstra could pay an annual dividend per share of 21 cents in FY26 (with further dividend increases in the coming years). This implies the company could deliver a cash dividend yield of 4.2% and a grossed-up dividend yield of 6%, including franking credits, in FY26.
2. It's a defensive stock
A defensive stock is a company that tends to perform steadily, regardless of the stage of the economic cycle. Typically, this is because it provides essential goods or services that people need, regardless of the state of the economy. Telstra falls into this category because, in my view, mobile and internet connections in households and businesses is no longer a luxury but a necessity.
This means that if investors hold some defensive stocks, such as Telstra shares, in their share portfolio, it can help hedge against potential risk. It may even act as a safety net in the event of a share market crash. In my view, this is a compelling reason to hold Telstra shares in your portfolio.
3. There's a good potential upside for Telstra shares
Telstra has heavily invested in its 5G network over the past few years, which has helped the company boost its subscriber base and grow its market share.
Tradingview data shows that, out of 9 analysts, 3 have a strong buy rating on Telstra shares. The maximum target price for the stock is $5.40 per share, which, at the time of writing, implies a potential 9.76% upside over the next 12 months.
