Telekom Slovenije, d.d. (LJSE:TLSG) Is About To Go Ex-Dividend, And It Pays A 8.9% Yield

It looks like Telekom Slovenije, d.d. (LJSE:TLSG) is about to go ex-dividend in the next 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Telekom Slovenije d.d's shares on or after the 20th of March, you won't be eligible to receive the dividend, when it is paid on the 22nd of March.

The company's next dividend payment will be €3.10 per share, on the back of last year when the company paid a total of €6.20 to shareholders. Based on the last year's worth of payments, Telekom Slovenije d.d has a trailing yield of 8.9% on the current stock price of €70.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Telekom Slovenije d.d

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Its dividend payout ratio is 86% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. It could become a concern if earnings started to decline.

Click here to see how much of its profit Telekom Slovenije d.d paid out over the last 12 months.

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Telekom Slovenije d.d earnings per share are up 6.4% per annum over the last five years. Decent historical earnings per share growth suggests Telekom Slovenije d.d has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Telekom Slovenije d.d's dividend payments per share have declined at 6.4% per year on average over the past 10 years, which is uninspiring. Telekom Slovenije d.d is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

The Bottom Line

Has Telekom Slovenije d.d got what it takes to maintain its dividend payments? Telekom Slovenije d.d has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. Telekom Slovenije d.d ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

So while Telekom Slovenije d.d looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Case in point: We've spotted 2 warning signs for Telekom Slovenije d.d you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.