Owning Telstra Group Ltd (ASX: TLS) shares has been a rewarding choice for passive income over the last few years. Its rising payouts have unlocked a growing dividend yield for shareholders.
With how the ASX telco share has drifted 13% lower from May 2026, prospective investors are now being offered a lot of potential income.
When a share price falls, it increases the dividend yield at the same rate. For example, if a business had a 5% dividend yield and the share price falls 10%, the yield becomes 5.5%. A similar sort of effect has happened with Telstra this year.
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A rising dividend
While the market may not be as optimistic about the business as it was earlier this year, the dividend payments continue to grow, which I think implies the board of directors remains positive about the future and its financials.
In the FY26 result, Telstra's board of directors decided to hike its annual dividend per share by 10.5% to 21 cents. That translates into a dividend yield of 4.4% excluding franking credits and approximately 6% including franking credits.
However, I'd say the FY26 dividend is old news, and we should look ahead to the FY27 dividend, as we're already a couple of months into the 2027 financial year.
According to the projection on CMC Invest, the business could grow its annual dividend per share by another 4.75% in FY27. This would mean Telstra could provide a dividend yield of 4.6% excluding franking credits and approximately 6.25% including franking credits in FY27.
Is the Telstra share price a buy?
I wouldn't necessarily invest in an ASX share just for the passive income. But if dividends are a primary focus, then Telstra shares could be a solid option.
In FY26, the company grew cash operating profit (EBIT) by 8% to $4.7 billion, underlying net profit rose 4.9% to $2.5 billion, and cash earnings per share (EPS) jumped 14% to 25.5 cents.
With how the company has already invested heavily in its 5G network, I think the business' cash earnings can continue rising at a pleasing pace, funding bigger dividends.
Its mobile earnings continue to rise. FY26 mobile income grew 3% to $11.4 billion, and mobile operating profit (EBITDA) grew 3% to $5.4 billion. It saw both mobile users and average revenue per user (ARPU) increase.
I think the company's earnings can rise again in FY27 thanks to mobile price increases.
I reckon the Telstra share price is attractive for passive income and potential long-term capital growth as Australia becomes increasingly digital.
