Telstra Group Ltd (ASX: TLS) looks like a much stronger business than it did several years ago.
Its mobile division is growing, earnings are heading in the right direction, and the dividend has started increasing again. These are all qualities that could appeal to retirees looking for income without giving up on growth completely.
With Telstra shares trading around $5.08, could they now be a top pick for a retirement portfolio?
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An appealing source of income
Income would be one of my main reasons for considering Telstra shares in retirement.
According to CommSec, the telecommunications giant is expected to pay partially franked dividends of 21 cents per share in FY26 and 21.5 cents per share in FY27.
At the current share price, these estimates represent forecast dividend yields of approximately 4.1% and 4.2%, respectively. Franking credits could increase the value of that income for eligible Australian investors.
I also like that the dividend appears to have room to grow gradually. Telstra increased its interim payment to 10.5 cents per share following growth in cash earnings during the first half. Management has said it aims to deliver a sustainable and growing dividend under its capital management framework.
Of course, no dividend is guaranteed. But I think improving earnings give Telstra a stronger foundation for its payments than it had during the period when the company was dealing with the financial impact of the NBN rollout.
Steady earnings growth
I would not expect Telstra to grow at the pace of a small technology company.
The mobile business remains the company's most important growth engine. Mobile services revenue increased by 5.6% during the first half of FY26, supported by higher average revenue per user and more customers choosing Telstra's network.
Telstra is also working to reduce costs and become more efficient. Its underlying operating expenses fell by $179 million during the same period, helping cash earnings grow faster than revenue.
I think this combination of modest revenue growth and cost discipline could support gradually rising earnings, dividends, and potentially the share price over time.
The company's Connected Future 30 strategy is targeting mid-single-digit annual growth in cash earnings. It also plans to find new ways to generate value from its mobile network, intercity fibre infrastructure, and satellite ground station operations.
Defensive qualities
Telstra also has qualities that could make it more resilient during weaker economic periods.
Mobile and internet services have become essential for households and businesses. Customers may reduce spending elsewhere when conditions become difficult, but staying connected is generally a high priority.
Telstra's network position gives it another advantage. The company continues to invest in its mobile network, including 5G Advanced, while expanding its digital infrastructure through projects such as the Aura intercity fibre network.
Competition remains intense, and Telstra must continue investing heavily to protect its network leadership. There is also a risk that price increases encourage customers to move to cheaper providers.
Even so, I believe its scale, infrastructure, and recurring customer demand give Telstra more defensive earnings than many other ASX companies.
Foolish takeaway
I think Telstra shares could be a top pick for a retirement portfolio.
The forecast yield is appealing, the dividend is expected to grow modestly, and the underlying business is producing steady earnings growth.
Telstra may never be the most exciting ASX share. But for retirees seeking income, defensive qualities, and some potential for long-term growth, I think that could be exactly the point.
