Stock Analysis

TeleMasters Holdings (JSE:TLM) Will Pay A Dividend Of R0.016

JSE:TLM
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The board of TeleMasters Holdings Limited (JSE:TLM) has announced that it will pay a dividend of R0.016 per share on the 25th of October. This payment means that the dividend yield will be 4.3%, which is around the industry average.

Check out our latest analysis for TeleMasters Holdings

TeleMasters Holdings Might Find It Hard To Continue The Dividend

We aren't too impressed by dividend yields unless they can be sustained over time. The company is paying out a large amount of its cash flows, even though it isn't generating any profit. These payout levels would generally be quite difficult to keep up.

Recent, EPS has fallen by 40.3%, so this could continue over the next year. This means the company won't be turning a profit, which could place managers in the tough spot of having to choose between suspending the dividend or putting more pressure on the balance sheet.

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JSE:TLM Historic Dividend October 19th 2021

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The first annual payment during the last 10 years was R0.14 in 2011, and the most recent fiscal year payment was R0.064. Doing the maths, this is a decline of about 7.5% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited Growth Potential

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. TeleMasters Holdings' earnings per share has shrunk at 40% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

TeleMasters Holdings' Dividend Doesn't Look Great

In summary, while it is good to see that the dividend hasn't been cut, we think that at current levels the payment isn't particularly sustainable. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, the dividend is not reliable enough to make this a good 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. To that end, TeleMasters Holdings has 3 warning signs (and 2 which are a bit unpleasant) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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.

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