Deutsche Telekom's (ETR:DTE) Upcoming Dividend Will Be Larger Than Last Year's

The board of Deutsche Telekom AG (ETR:DTE) has announced that it will be paying its dividend of €0.77 on the 15th of April, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 3.5%, which is in line with the average for the industry.

See our latest analysis for Deutsche Telekom

Deutsche Telekom's Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. 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.

The next year is set to see EPS grow by 87.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 35%, which is in the range that makes us comfortable with the sustainability of the dividend.

Deutsche Telekom Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was €0.50, compared to the most recent full-year payment of €0.77. This works out to be a compound annual growth rate (CAGR) of approximately 4.4% a year over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

Deutsche Telekom Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Deutsche Telekom has been growing its earnings per share at 7.8% a year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

We Really Like Deutsche Telekom's Dividend

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

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Deutsche Telekom that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.