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Telenor ASA (OB:TEL) has pleased shareholders over the past 10 years, by paying out dividends. The company currently pays out a dividend yield of 4.9% to shareholders, making it a relatively attractive dividend stock. Should it have a place in your portfolio? Let’s take a look at Telenor in more detail.

Check out our latest analysis for Telenor

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How I analyze a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

• Is it paying an annual yield above 75% of dividend payers?

• Has it paid dividend every year without dramatically reducing payout in the past?

• Has it increased its dividend per share amount over the past?

• Is its earnings sufficient to payout dividend at the current rate?

• Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

Does Telenor pass our checks?

Telenor has a trailing twelve-month payout ratio of 84%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 87% which, assuming the share price stays the same, leads to a dividend yield of 5.4%. Furthermore, EPS should increase to NOK10.28.

If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.

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 TEL it has increased its DPS from NOK3.4 to NOK8.1 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, Telenor generates a yield of 4.9%, which is on the low-side for Telecom stocks.

Next Steps:

Keeping in mind the dividend characteristics above, Telenor is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three key factors you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for TEL’s future growth? Take a look at our free research report of analyst consensus for TEL’s outlook.

2. Valuation: What is TEL 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 TEL is currently mispriced by the market.

3. 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 editorial-team@simplywallst.com.