Have Telstra shares peaked, or is there more upside ahead?

Telstra Group Ltd (ASX: TLS) shares are sitting near a nine-year high, trading around $5.41 at the time of writing.

It’s been a strong run, with the telco up 11% year to date and 22% over the past 12 months. By comparison the S&P/ASX 200 Index (ASX: XJO) gained 3% in 2026 and 16% in the past year.

So, is this as good as it gets for Telstra shares or is there still more in the tank?

Go-to share in volatile markets

Let’s start with the strengths of Telstra shares. The business remains Australia’s dominant telecommunications provider, with unmatched scale across mobile networks and infrastructure. That leadership matters. It gives the company real pricing power. And right now, it’s using it.

Recent price hikes on mobile plans are a key catalyst. With customers relatively sticky, higher prices are expected to flow straight through to revenue and margins. In a high-cost environment, that’s a powerful advantage.

It also helps that Telstra operates in a defensive sector. Connectivity is no longer optional. Whether the economy is booming or slowing, people still pay their phone and internet bills. That stability makes Telstra a go-to in volatile markets.

Attractive yield and reliability

Then there’s the income appeal. Telstra shares has long been a favourite for dividend investors, backed by steady cash flow and a mature business model. Its payout ratio sits close to 100% of earnings, underlining its focus on returning capital to shareholders.

The company pays two dividends a year. Just last month, investors received an interim dividend of 10.5 cents per share, 90.48% franked. Management is forecasting a full-year dividend of 20 cents for FY26.

That combination of yield and reliability continues to attract investors searching for income.

Steady gains, fierce competition

But it’s not all smooth sailing for Telstra shares. Growth remains modest. Telstra isn’t a high-flying tech disruptor, it’s a mature business. That means gains tend to be steady rather than explosive.

Competition is another ongoing challenge. Rivals continue to push for market share in both mobile and broadband. While Telstra’s network advantage is real, it’s not untouchable. Any slip in execution could open the door for competitors.

There’s also a limit to pricing power. Push prices too far, and even loyal customers may start to look elsewhere. That’s a delicate balance Telstra will need to manage carefully.

The bottom line?

Telstra shares have already delivered solid gains, but the story may not be finished.

With strong pricing power, dependable income, and defensive appeal, the telco still has room to edge higher. Just don’t expect fireworks.

Analysts at Macquarie Group Ltd (ASX: MQG) have an outperform rating on Telstra shares. They expect recent price increases to support both earnings and dividends. It has set a 12-month price target of $5.64, implying modest upside of around 4.5% from current levels.

This is a steady compounder, not a rocket ship.

The post Have Telstra shares peaked, or is there more upside ahead? appeared first on The Motley Fool Australia.

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Motley Fool contributor Marc Van Dinther 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.