Koninklijke KPN's (AMS:KPN) Shareholders Will Receive A Bigger Dividend Than Last Year

Koninklijke KPN N.V.'s (AMS:KPN) periodic dividend will be increasing on the 19th of April to €0.095, with investors receiving 4.4% more than last year's €0.091. The payment will take the dividend yield to 4.5%, which is in line with the average for the industry.

See our latest analysis for Koninklijke KPN

Koninklijke KPN's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Koninklijke KPN's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 11.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 74%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2013, the dividend has gone from €0.90 total annually to €0.139. This works out to a decline of approximately 85% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Koninklijke KPN has seen EPS rising for the last five years, at 11% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Koninklijke KPN Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Koninklijke KPN is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 3 warning signs for Koninklijke KPN that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.