Four Days Left To Buy Deutsche Telekom AG (ETR:DTE) Before The Ex-Dividend Date

Deutsche Telekom AG (ETR:DTE) is about to trade ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Deutsche Telekom's shares before the 11th of April to receive the dividend, which will be paid on the 15th of April.

The company's upcoming dividend is €0.77 a share, following on from the last 12 months, when the company distributed a total of €0.77 per share to shareholders. Based on the last year's worth of payments, Deutsche Telekom has a trailing yield of 3.5% on the current stock price of €22.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Deutsche Telekom

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Deutsche Telekom paid out 94% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 21% of its free cash flow as dividends last year, which is conservatively low.

It's good to see that while Deutsche Telekom's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if the company continues paying out such a high percentage of its profits, the dividend could be at risk if business turns sour.

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. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Deutsche Telekom's earnings per share have been growing at 13% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Deutsche Telekom has lifted its dividend by approximately 4.4% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

To Sum It Up

From a dividend perspective, should investors buy or avoid Deutsche Telekom? It's good to see earnings per share growing and low cashflow payout ratio, although we're uncomfortable with Deutsche Telekom's paying out such a high percentage of its profit. To summarise, Deutsche Telekom looks okay on this analysis, although it doesn't appear a stand-out opportunity.

On that note, you'll want to research what risks Deutsche Telekom is facing. Case in point: We've spotted 3 warning signs for Deutsche Telekom you should be aware of.

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.