Deutsche Telekom's (ETR:DTE) Dividend Will Be Increased To €0.70

Deutsche Telekom AG's (ETR:DTE) dividend will be increasing from last year's payment of the same period to €0.70 on 11th of April. This makes the dividend yield about the same as the industry average at 3.4%.

Check out our latest analysis for Deutsche Telekom

Deutsche Telekom's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. The last dividend was quite easily covered by Deutsche Telekom's earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 28.5% 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

The company has a long dividend track record, but it doesn't look great with cuts in the past. The most recent annual payment of €0.70 is about the same as the annual payment 10 years ago. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

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. We are encouraged to see that Deutsche Telekom has grown earnings per share at 324% per 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, a dividend increase is always good, and we think that Deutsche Telekom is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Deutsche Telekom (1 is a bit unpleasant!) that you should be aware of before investing. Is Deutsche Telekom not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.