Buy 6,316 shares of this top ASX dividend stock for $100 a month in passive income

Highest dividend stocks on the ASX Telstra Group Ltd (ASX:TLS) continues to be an impressive source of passive income year after year.

Recently, the company has started increasing its dividend payments to shareholders again, which is a welcome development in this period of high inflation.

Companies that pay high and growing dividends might be just what income-seeking investors are looking for.

Buying the right amount of Telstra shares could net you $100 a month, with the telco generating an impressive level of defensive profits each year.

Telstra doesn’t pay its dividend every month, so we’ll think about passive income in annual terms.

Generate $100 of passive income per month Telstra shares

$1,200 per year in dividends is a nice dividend amount.

Telstra’s last half-yearly dividend was 9 cents per share. According to Commsec, Telstra is expected to pay an annual dividend of 19 cents per share in FY25, which translates into a fully franked dividend yield of around 5% and a gross dividend yield of 7.1%. That’s an impressive starting yield, in my opinion.

Commsec’s estimate also suggests the ASX dividend could increase to 20 cents per share in FY26.

However, I will focus on the FY25 numbers for this situation.

If we simply look at cash payments rather than gross income, we would need to purchase 6,316 Telstra shares to receive $1,200 of annual passive income.

If someone was trying to generate $1,200 in gross dividend income, they would need to purchase 4,422 Telstra shares to earn the appropriate amount of passive income for FY25.

How much would it cost?

At Telstra’s current share price, buying 6,316 shares would cost about $24,000.

If someone were to aim for 4,422 shares instead, the total investment would be about $17,000.

Can ASX share dividend payouts continue to rise?

Telco ASX stock wants to increase its dividend for investors if it can.

There are at least two favorable factors that can help it generate growing profits and finance larger payouts.

First, the number of mobile subscribers continues to grow. Spreading more users across the same infrastructure is a useful way to improve margins. In its half-year results for fiscal 2024, the company reported that it increased its total subscriber count by 625,000 year-on-year, which is a 4.6% percentage increase.

The other positive factor I would like to highlight is the continued rise in mobile phone prices. The company recently announced price increases of between $2 and $4 per month for both prepaid and postpaid mobile plans. It justified this increase by pointing out that the company needs to continue investing in its network, and its network traffic is growing by 20% per year. Higher revenues can contribute to earnings and dividend growth with this ASX dividend stock.

The post Buy 6,316 shares of this top ASX dividend stock for $100 a month of passive income appeared first on The Motley Fool Australia.

Further reading

• Why this top broker thinks Telstra shares can deliver a 20% return in FY25
• 3 Cheap ASX Shares Offering Dividend Yields of 4.5% and More
• Top ASX shares to buy ahead of results season
• Buy Woolworths and these ASX 200 dividend stocks
• Here’s a way to invest $20,000 to target an average ASX dividend yield of 7%

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. Motley Fool Australia’s parent company, Motley Fool Holdings Inc., has no position in any of the stocks mentioned. Motley Fool Australia has a position in and has recommended Telstra Group. Motley Fool has a disclosure policy. This article contains general investment advice only (in accordance with AFSL 400691). Authorized by Scott Phillips.