Koninklijke KPN (AMS:KPN) Is Increasing Its Dividend To €0.098

Koninklijke KPN N.V.'s (AMS:KPN) periodic dividend will be increasing on the 25th of April to €0.098, with investors receiving 3.2% more than last year's €0.095. This takes the annual payment to 4.4% of the current stock price, which is about average for the industry.

View our latest analysis for Koninklijke KPN

Koninklijke KPN's Earnings Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before this announcement, Koninklijke KPN was paying out 74% of earnings, but a comparatively small 60% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Over the next year, EPS is forecast to expand by 26.6%. If the dividend continues on this path, the payout ratio could be 65% by next year, which we think can be pretty sustainable going forward.

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Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of €0.04 in 2014 to the most recent total annual payment of €0.15. This means that it has been growing its distributions at 14% per annum over that time. Koninklijke KPN has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Koninklijke KPN has grown earnings per share at 30% per year over the past five years. However, Koninklijke KPN isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.

Koninklijke KPN Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Koninklijke KPN is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Koninklijke KPN that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.