If I had to pick the best ASX dividend stock to buy in March, Telstra Group Ltd (ASX: TLS) would be high on my list.
After its February results, I think the investment case for income-focused investors looks stronger than it has in years.
Here's why.
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A growing dividend
Telstra declared an interim dividend of 10.5 cents per share, which was up 10% on the prior period. Importantly, the dividend was 90.5% franked, with 9.5 cents franked and 1 cent unfranked.
If we annualise that interim dividend, we get 21 cents per share for the full year.
At a share price of $5.18, that implies a forward dividend yield of approximately 4.1%.
And with around 90% franking, the grossed-up yield for Australian investors on lower tax rates looks even more attractive.
But what excites me most isn't the yield. It's the trajectory.
CEO Vicki Brady emphasised that the interim dividend uplift is consistent with Telstra's aim to deliver a "sustainable and growing dividend" supported by strong cash earnings.
This is no longer a flat, stagnant dividend story.
Strong cash earnings underpinning payouts
One of the key reasons I'm comfortable with Telstra as a dividend stock is its improving cash profile.
Telstra delivered 14% Cash EBIT growth in the half and reduced underlying operating expenses by $179 million through cost discipline and efficiency gains.
Importantly, management has tightened FY26 underlying EBITDA guidance to between $8.2 billion and $8.4 billion.
That tightening suggests confidence in the outlook.
When I look at dividend stocks, I want earnings growth, not just higher payout ratios. Telstra's "Connected Future 30" strategy is focused on driving mid-single-digit growth in cash earnings over time.
That is exactly what you want backing a dividend.
Mobile momentum and pricing power
The mobile business remains the engine room.
Mobiles delivered EBITDA growth of $93 million in the half, driven by higher ARPU and more customers choosing Telstra's network. Mobile services revenue grew by 5.6%.
That tells me two important things. Telstra still has brand and network strength and it has pricing power in a rational market.
Telecommunications is a critical service. In an uncertain economic environment, that defensive characteristic matters.
Buybacks supporting per-share growth
Income investors should also pay attention to capital management.
Telstra increased its on-market share buyback from up to $1 billion to up to $1.25 billion.
Buybacks reduce the share count, which supports earnings per share and dividend per share growth over time.
That combination of dividend growth and buybacks is powerful.
Foolish takeaway
There are higher-yielding stocks on the ASX. There are also fully franked alternatives.
But I'm looking for sustainable cash flow, growing earnings, defensive demand, strong capital management, and a realistic dividend yield, not a stretched one
At around 4.1% yield, with approximately 90% franking, I think Telstra offers attractive income. More importantly, it offers growth in that income.
After years of restructuring and simplification, Telstra now looks like a more focused connectivity business with improving operating leverage, disciplined costs, and clear strategic direction.
For investors seeking reliable, growing income in March, I think Telstra stands out as one of the best ASX dividend stocks to buy.
