Yahoo Finance Just 2 Days Before TalkTalk Telecom Group PLC (LON:TALK) Will Be Trading Ex-Dividend
Readers hoping to buy TalkTalk Telecom Group PLC (LON:TALK) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You can purchase shares before the 28th of November in order to receive the dividend, which the company will pay on the 16th of December.
TalkTalk Telecom Group's upcoming dividend is UK£0.01 a share, following on from the last 12 months, when the company distributed a total of UK£0.025 per share to shareholders. Calculating the last year's worth of payments shows that TalkTalk Telecom Group has a trailing yield of 2.4% on the current share price of £1.039. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether TalkTalk Telecom Group has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for TalkTalk Telecom Group
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Its dividend payout ratio is 79% 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. A useful secondary check can be to evaluate whether TalkTalk Telecom Group generated enough free cash flow to afford its dividend. Dividends consumed 61% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
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?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. It's not encouraging to see that TalkTalk Telecom Group's earnings are effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. A high payout ratio of 79% generally happens when a company can't find better uses for the cash. Combined with slim earnings growth in the past few years, TalkTalk Telecom Group could be signalling that its future growth prospects are thin.
We'd also point out that TalkTalk Telecom Group issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. TalkTalk Telecom Group's dividend payments per share have declined at 3.4% per year on average over the past nine years, which is uninspiring.
Final Takeaway
Is TalkTalk Telecom Group worth buying for its dividend? Earnings per share have barely grown, and although TalkTalk Telecom Group paid out over half its earnings and free cash flow last year, the payout ratios are within a normal range for most companies. Overall, it's hard to get excited about TalkTalk Telecom Group from a dividend perspective.
Curious what other investors think of TalkTalk Telecom Group? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
