Why You Might Be Interested In T-Mobile US, Inc. (NASDAQ:TMUS) For Its Upcoming 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 two business day to settle. Therefore, if you purchase T-Mobile US' shares on or after the 29th of February, you won't be eligible to receive the dividend, when it is paid on the 14th of March.

The upcoming dividend for T-Mobile US is US$0.65 per share. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether T-Mobile US has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for T-Mobile US

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. T-Mobile US has a low and conservative payout ratio of just 19% of its income after tax. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 9.6% of its free cash flow in the last year.

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.

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, T-Mobile US's earnings per share have been growing at 16% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

This is T-Mobile US's first year of paying a dividend, so it doesn't have much of a history yet to compare to.

To Sum It Up

Is T-Mobile US an attractive dividend stock, or better left on the shelf? 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. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in T-Mobile US for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 3 warning signs for T-Mobile US 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.

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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.