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Deutsche Telekom AG (ETR:DTE) will increase its dividend from last year's comparable payment on the 11th of April to €0.70. Based on this payment, the dividend yield for the company will be 3.4%, which is fairly typical for the industry.
Check out our latest analysis for Deutsche Telekom
Deutsche Telekom's Earnings Easily Cover The Distributions
Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, Deutsche Telekom was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.
Looking forward, earnings per share is forecast to rise by 31.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. There hasn't been much of a change in the dividend over the last 10 years. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.
The Dividend Looks Likely To Grow
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. It's encouraging to see that Deutsche Telekom has been growing its earnings per share at 324% a year over the past five years. Deutsche Telekom is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.
Deutsche Telekom Looks Like A Great Dividend Stock
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.
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. Just as an example, we've come across 3 warning signs for Deutsche Telekom you should be aware of, and 1 of them shouldn't be ignored. Is Deutsche Telekom not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.