Telecom Plus' (LON:TEP) Dividend Will Be £0.36
Telecom Plus Plc (LON:TEP) has announced that it will pay a dividend of £0.36 per share on the 15th of December. This will take the dividend yield to an attractive 5.5%, providing a nice boost to shareholder returns.
Check out our latest analysis for Telecom Plus
Telecom Plus' Payment Has Solid Earnings Coverage
A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.
EPS is set to grow by 27.3% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 81% - on the higher side, but we wouldn't necessarily say this is unsustainable.
Telecom Plus Has A Solid Track Record
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was £0.31 in 2013, and the most recent fiscal year payment was £0.92. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.
Telecom Plus Might Find It Hard To Grow Its Dividend
Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Telecom Plus has been growing its earnings per share at 17% a year over the past five years. While EPS is growing at a decent rate, but future growth could be limited by the amount of earnings being paid out to shareholders.
The Dividend Could Prove To Be Unreliable
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. Although they have been consistent in the past, we think the payments are a little high to be sustained. This company is not in the top tier of income providing stocks.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Telecom Plus (2 can't be ignored!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
