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Deutsche Telekom (ETR:DTE) Is Increasing Its Dividend To €0.77

The board of Deutsche Telekom AG (ETR:DTE) has announced that it will be paying its dividend of €0.77 on the 15th of April, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 3.5%, which is in line with the average for the industry.

See our latest analysis for Deutsche Telekom

Deutsche Telekom's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, Deutsche Telekom was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 87.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 35% by next year, which is in a pretty sustainable range.

historic-dividend
historic-dividend

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the annual payment back then was €0.70, compared to the most recent full-year payment of €0.77. Dividend payments have grown at less than 1% a year over this period. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

We Could See Deutsche Telekom's Dividend Growing

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Deutsche Telekom has impressed us by growing EPS at 7.8% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Deutsche Telekom that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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