Telephone and Data Systems (NYSE:TDS) Has Announced A Dividend Of $0.185
Telephone and Data Systems, Inc.'s (NYSE:TDS) investors are due to receive a payment of $0.185 per share on 29th of December. This means that the annual payment will be 4.1% of the current stock price, which is in line with the average for the industry.
Check out our latest analysis for Telephone and Data Systems
Telephone and Data Systems' Distributions May Be Difficult To Sustain
Unless the payments are sustainable, the dividend yield doesn't mean too much. Even though Telephone and Data Systems isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.
Looking forward, earnings per share is forecast to expand by 7.8% over the next year. It's encouraging to see things moving in the right direction, but this probably won't be enough for the company to turn a profit. The positive free cash flows give us some comfort, however, that the dividend could continue to be sustained.
Telephone and Data Systems Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the dividend has gone from $0.51 total annually to $0.74. This works out to be a compound annual growth rate (CAGR) of approximately 3.8% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
Dividend Growth Potential Is Shaky
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Telephone and Data Systems' earnings per share has shrunk at 41% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
Our Thoughts On Telephone and Data Systems' Dividend
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would probably look elsewhere for an income investment.
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. Case in point: We've spotted 3 warning signs for Telephone and Data Systems (of which 2 are significant!) you should know about. 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.
