When markets turn volatile, I look for businesses that can keep paying me no matter what the economy is doing. For me, Telstra Group Ltd (ASX: TLS) sits firmly in that category.
Last Thursday, Telstra released its half-year results. There was plenty to digest across earnings, cash flow, and guidance. However, the key takeaway for income investors was the dividend and the strength of the cash earnings supporting it.
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A dividend that keeps climbing
Telstra declared an interim dividend of 10.5 cents per share, up from 9.5 cents a year ago. That represents growth of just over 10% year-on-year.
Importantly, the dividend was 90.48% franked. For shareholders, that adds significant after-tax value, particularly for retirees and those holding shares outside super.
Based on Telstra's recent share price of $5.09, the dividend yield is roughly 6% before franking.
Management highlighted continued earnings growth, disciplined capital management, and strong cash flow generation. Cash earnings per share (EPS) rose 20% in the half, helping underpin both dividends and ongoing share buy-backs.
For me, that mix is attractive. It provides income today, alongside capital management that supports long-term shareholder returns.
Defensive by nature
One of the reasons I would hold Telstra through almost any market condition is the nature of its business.
People might cut discretionary spending in a downturn. They might delay buying a new car or cancel a holiday. But they are unlikely to cancel their mobile phone plan or home internet.
Connectivity has become an essential service. Whether the economy is booming or struggling, Australians still need to work, stream, bank, and communicate.
Telstra remains the dominant player in mobile, with a premium network and strong market share. That scale provides pricing power and earnings stability. It also underpins recurring revenue, a key feature for income-focused investors.
Cash flow doing the heavy lifting
The latest results showed underlying EBITDA growth and improved cash generation. Operating cash flow funded ongoing network investment while also enabling increased returns to shareholders.
Telstra is continuing to invest in infrastructure, including fibre and 5G, while also executing on a sizeable buy-back. At the same time, it reaffirmed its full-year guidance, providing further confidence around dividend sustainability.
Maintaining this balance between reinvesting in the business and returning capital to shareholders is essential. A high yield means little if it is not sustainable. Telstra's payout is well supported by earnings and cash flow for the foreseeable future.
The kind of stock you can sleep on
Telstra is unlikely to double overnight. It is not an artificial intelligence darling or a speculative explorer.
But it does something arguably more valuable. It provides reliable income, moderate growth, and defensive characteristics in a single package.
In uncertain times, that is exactly the type of business I want in my portfolio. And this is why Telstra remains an Australian dividend stock I would be comfortable holding through almost anything.
