Telia Company (STO:TELIA) Has Announced A Dividend Of SEK0.50

The board of Telia Company AB (publ) (STO:TELIA) has announced that it will pay a dividend on the 5th of August, with investors receiving SEK0.50 per share. The dividend yield will be 5.7% based on this payment which is still above the industry average.

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Telia Company's Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, the dividend made up 82% of cash flows, but a higher proportion of net income. The company could be more focused on returning cash to shareholders, but this could indicate that growth opportunities are few and far between.

EPS is set to grow by 51.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 91%, which is on the higher side, but certainly still feasible.

View our latest analysis for Telia Company

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was SEK3.00 in 2015, and the most recent fiscal year payment was SEK2.00. Doing the maths, this is a decline of about 4.0% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Telia Company Might Find It Hard To Grow Its Dividend

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. Telia Company has impressed us by growing EPS at 14% per year over the past five years. However, the company isn't reinvesting a lot back into the business, so we would expect the growth rate to slow down somewhat in the future.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. Strong earnings growth means Telia Company has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Telia Company that you should be aware of before investing. Is Telia Company not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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