Are Telstra shares a good buy for passive income?

The telco offers its shareholders much more than just a potential share price upside.

Telstra Group Ltd (ASX: TLS) shares have had a volatile run through the first nine months of 2026. 

The ASX telco's shares flew to a 10-year high of $5.55 a piece in mid-May, but then they crashed around 18% to an annual low in late-August. Since then, the shares have rebounded again.

At the time of writing, Telstra shares are trading at $4.86 a piece. That's around a 5% increase from last month's low and around 1% lower for the year to date.

Going forward, it looks like there could be a lot more upside ahead for the shares. TradingView data shows that the majority of analysts have a buy/strong buy rating on the stock, and some tip an upside of up to 13% to a maximum $5.50 target price.

It's not all about share price gains and losses, though. Telstra has plenty more to offer its shareholders.

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Image source: Getty Images

Telstra shares are a great buy for passive income

Telstra, as a business, is classically defensive. As a provider of internet access and mobile connectivity, the telco benefits from a stable income.

Phone and internet connectivity are considered essential services, which means their offerings are in high demand regardless of where we are in the economic cycle, inflation rates, or the cost of living.

And that means the company is able to perform steadily over the long term, rather than being subject to market fluctuations, cyclical growth, or shifting investor sentiment.

This is great news for investors who want to hedge against potential volatility elsewhere in the index.

Just last month, the company announced its FY26 results, including a 4% year-on-year increase in EBITDA to $8.3 billion and a 4.9% increase in underlying NPAT to $2.5 billion.

Going forward, Telstra expects to continue growing its underlying EBITDA and has posted guidance of between $8.5 billion and $8.8 billion in FY27.

It's this consistent performance, combined with Telstra's defensive nature, that enables the company to pay its shareholders a reliable, consistent passive income stream.

Not only that, its dividend payout ratio is close to 100% of company earnings, which unlocks a great dividend yield.

What passive income does the telco pay its shareholders?

Telstra traditionally makes two fully-franked dividend payments to shareholders every year, payable in March and September. 

The telco paid its shareholders a 10.5-cent dividend in March, 90.48% franked, and a final 9.5-cent, fully-franked dividend this month. That totals 21 cents for FY26.

Based on the latest forecasts, the telco is also expected to pay a total dividend of 21 cents per share in FY27.

Based on the current share price, that translates to a dividend yield of around 4.4% for FY26 and FY27.

Motley Fool contributor Samantha Menzies has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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