Three Days Left Until Telenor ASA (OB:TEL) Trades Ex-Dividend
Telenor ASA (OB:TEL) stock is about to trade ex-dividend in 3 days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Telenor's shares before the 15th of October in order to receive the dividend, which the company will pay on the 27th of October.
The company's next dividend payment will be kr04.70 per share, on the back of last year when the company paid a total of kr9.70 to shareholders. Looking at the last 12 months of distributions, Telenor has a trailing yield of approximately 7.8% on its current stock price of kr0124.50. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Telenor has been able to grow its dividends, or if the dividend might be cut.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Its dividend payout ratio is 83% 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. 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. It paid out more than half (73%) of its free cash flow in the past year, which is within an average range for most companies.
It's positive to see that Telenor's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
See our latest analysis for Telenor
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. With that in mind, we're encouraged by the steady growth at Telenor, with earnings per share up 3.3% on average over the last five years. A payout ratio of 83% looks like a tacit signal from management that reinvestment opportunities in the business are low. In line with limited earnings growth in recent years, this is not the most appealing combination.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Telenor has increased its dividend at approximately 2.6% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Final Takeaway
Is Telenor worth buying for its dividend? Earnings per share have been growing modestly and Telenor paid out a bit over half of its earnings and free cash flow last year. All things considered, we are not particularly enthused about Telenor from a dividend perspective.
However if you're still interested in Telenor as a potential investment, you should definitely consider some of the risks involved with Telenor. We've identified 2 warning signs with Telenor (at least 1 which is significant), and understanding these should be part of your investment process.
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.