Yahoo Finance Telefónica Deutschland Holding's (ETR:O2D) Dividend Will Be €0.18
Telefónica Deutschland Holding AG (ETR:O2D) has announced that it will pay a dividend of €0.18 per share on the 20th of May. This makes the dividend yield 7.7%, which will augment investor returns quite nicely.
View our latest analysis for Telefónica Deutschland Holding
Telefónica Deutschland Holding Is Paying Out More Than It Is Earning
If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Telefónica Deutschland Holding's profits didn't cover the dividend, but the company was generating enough cash instead. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.
EPS is set to fall by 8.1% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could reach over 200%, which could put the dividend under pressure if earnings don't start to improve.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from €0.45 total annually to €0.18. Doing the maths, this is a decline of about 8.8% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
Dividend Growth Could Be Constrained
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Telefónica Deutschland Holding has seen EPS rising for the last five years, at 53% per annum. While EPS is growing rapidly, Telefónica Deutschland Holding paid out a very high 195% of its income as dividends. If earnings continue to grow, this dividend may be sustainable, but we think a payout this high definitely bears watching.
Our Thoughts On Telefónica Deutschland Holding's Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Telefónica Deutschland Holding's payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Telefónica Deutschland Holding that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of 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.
