T-Mobile US, Inc. (NASDAQ:TMUS) Passed Our Checks, And It's About To Pay A US$0.88 Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that T-Mobile US, Inc. (NASDAQ:TMUS) is about to go ex-dividend in just four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least one business day to settle. Thus, you can purchase T-Mobile US' shares before the 30th of May in order to receive the dividend, which the company will pay on the 12th of June.

The company's next dividend payment will be US$0.88 per share, and in the last 12 months, the company paid a total of US$3.52 per share. Looking at the last 12 months of distributions, T-Mobile US has a trailing yield of approximately 1.4% on its current stock price of US$242.88. 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.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see T-Mobile US paying out a modest 32% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 30% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Check out our latest analysis for T-Mobile US

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see T-Mobile US has grown its earnings rapidly, up 21% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past two years, T-Mobile US has increased its dividend at approximately 16% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

From a dividend perspective, should investors buy or avoid T-Mobile US? T-Mobile US has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. T-Mobile US looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example - T-Mobile US has 1 warning sign we think 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.