Stock Analysis

Deutsche Telekom (ETR:DTE) Has Announced That It Will Be Increasing Its Dividend To €0.70

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Deutsche Telekom AG (ETR:DTE) will increase its dividend on the 11th of April to €0.70, which is 9.4% higher than last year's payment from the same period of €0.64. The payment will take the dividend yield to 3.3%, which is in line with the average for the industry.

Check out the opportunities and risks within the DE Telecom industry.

Deutsche Telekom's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, Deutsche Telekom was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 34.9%. If the dividend continues on this path, the payout ratio could be 36% by next year, which we think can be pretty sustainable going forward.

XTRA:DTE Historic Dividend December 2nd 2022

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the annual payment back then was €0.70, compared to the most recent full-year payment of €0.64. Payments have been decreasing at a very slow pace in this time period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Deutsche Telekom has grown earnings per share at 324% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

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. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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.

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