Looking at TPG Telecom Ltd (ASX: TPG) shares today, a few things might stand out. For one, this S&P/ASX 200 Index (ASX: XJO) telco is, at the current share price of $3.84, a good 29% or so below where the company was this time last year.
For another, TPG is currently trading on a whopping trailing dividend yield of 5.22%, which is obviously a pretty hefty yield. Especially so when we consider that most other ASX blue chips aren't offering anything near that right now. Even TPG's telco rival Telstra Group Ltd (ASX: TLS), a stock not exactly known for being thrifty when it comes to dividends, is 'only' offering a yield of 4.3% right now.
So does this 5.2% yield mean TPG shares are a no-brainer buy for dividend income today? That's what we'll be diving into presently.
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Are TPG shares a buy for that 5.2% yield?
Well, first, let's break down where that 5.2% figure comes from. Over the past 12 months, TPG has doled out two dividends to its shareholders, as is its habit. The first of those dividends was the final payout from April, worth 9 cents per share. The second was last month's interim dividend, worth 10 cents per share. Both payouts came partially franked at 30% and 25%, respectively.
These were pleasing payouts, given both of TPG's ordinary 2025 dividends came in at 9 cents apiece. Saying that, investors did enjoy a special dividend worth another 9 cents per share last November, which won't be repeated in 2026.
The 19 cents that TPG has doled out this year gives the company a 5.2% yield at the current share price of $3.84. Well, 5.22%, to be precise.
However, there are a few things to note before one should rush out to secure this dividend yield.
Firstly, TPG has just completed a major restructuring (hence the massive share price drop last year). As investors may remember, the company sold off some of its infrastructure assets, slimming down into a tighter, leaner company. This seems to have gone down well, with TPG reporting some pleasing half-year numbers back in August.
However, with the company's free cash flow dropping from $305 million in August 2025 to $199 million in August 2026, there is obviously less breathing room for dividends. The company did report pro forma free cash flow of 16.4% this year, so things are heading in the right direction. But I think it is too soon to comfortably predict what will happen to this company's payouts next year and beyond.
What's next for TPG's payouts?
Saying that, some brokers are more optimistic. Last month, my Fool colleague Grace reported that analysts are expecting 22 cents per share in fully-franked dividends for FY 2027, rising to 22.5 cents per share in FY 2028.
If that turns out to be the case, today's starting yield of 5.22% arguably wouldn't be a bad proposition for income investors. But we'll have to wait until next year to know for sure.
