There's A Lot To Like About Telekom Austria's (VIE:TKA) Upcoming €0.32 Dividend

Telekom Austria AG (VIE:TKA) stock is about to trade ex-dividend in three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Telekom Austria's shares on or after the 12th of June, you won't be eligible to receive the dividend, when it is paid on the 15th of June.

The company's next dividend payment will be €0.32 per share. Last year, in total, the company distributed €0.32 to shareholders. Based on the last year's worth of payments, Telekom Austria has a trailing yield of 4.7% on the current stock price of €6.88. If you buy this business for its dividend, you should have an idea of whether Telekom Austria's dividend is reliable and sustainable. So we need to investigate whether Telekom Austria can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Telekom Austria

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Telekom Austria paying out a modest 33% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 26% of its free cash flow in the past year.

It's positive to see that Telekom Austria's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Telekom Austria's earnings per share have risen 15% per annum over the last five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Telekom Austria has lifted its dividend by approximately 20% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Is Telekom Austria an attractive dividend stock, or better left on the shelf? Telekom Austria has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Telekom Austria looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks Telekom Austria is facing. To help with this, we've discovered 1 warning sign for Telekom Austria that you should be aware of before investing in their shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.