If you are interested in cashing in on Telephone and Data Systems Inc’s (NYSE:TDS) upcoming dividend of US$0.16 per share, you only have 3 days left to buy the shares before its ex-dividend date, 13 September 2018, in time for dividends payable on the 28 September 2018. Is this future income a persuasive enough catalyst for investors to think about Telephone and Data Systems as an investment today? Below, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.
5 checks you should use to assess a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it the top 25% annual dividend yield payer?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has the amount of dividend per share grown over the past?
- Does earnings amply cover its dividend payments?
- Will it have the ability to keep paying its dividends going forward?
How well does Telephone and Data Systems fit our criteria?
Telephone and Data Systems has a trailing twelve-month payout ratio of 39.6%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 41.7%, leading to a dividend yield of around 2.2%. In addition to this, EPS is forecasted to fall to $0.97 in the upcoming year.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. In the case of TDS it has increased its DPS from $0.38 to $0.64 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
Relative to peers, Telephone and Data Systems produces a yield of 2.2%, which is on the low-side for Wireless Telecom stocks.
Taking into account the dividend metrics, Telephone and Data Systems ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three fundamental factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for TDS’s future growth? Take a look at our free research report of analyst consensus for TDS’s outlook.
- Valuation: What is TDS worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether TDS is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.