T-Mobile US (NASDAQ:TMUS) Will Pay A Larger Dividend Than Last Year At $0.88

The board of T-Mobile US, Inc. (NASDAQ:TMUS) has announced that it will be paying its dividend of $0.88 on the 12th of December, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 1.5%, which is below the industry average.

See our latest analysis for T-Mobile US

T-Mobile US' Payment Could Potentially Have Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, T-Mobile US' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 60.9%. If the dividend continues on this path, the payout ratio could be 20% by next year, which we think can be pretty sustainable going forward.

T-Mobile US Doesn't Have A Long Payment History

Without a track record of dividend payments, we can't make a judgement on how stable it has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that T-Mobile US has been growing its earnings per share at 18% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for T-Mobile US' prospects of growing its dividend payments in the future.

T-Mobile US Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that T-Mobile US 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 in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for T-Mobile US that investors need to be conscious of moving forward. Is T-Mobile US not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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