The board of T-Mobile US, Inc. (NASDAQ:TMUS) has announced that it will be paying its dividend of $0.88 on the 12th of December, an increased payment from last year’s comparable dividend. Although the dividend is now higher, the yield is only 1.7%, which is below the industry average.
Check out our latest analysis for T-Mobile US
T-Mobile US’ Future Dividend Projections Appear Well Covered By Earnings
Even a low dividend yield can be attractive if it is sustained for years on end. However, T-Mobile US’ earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
The next year is set to see EPS grow by 78.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 20%, which is in the range that makes us comfortable with the sustainability of the dividend.
T-Mobile US Is Still Building Its Track Record
The company hasn’t been paying a dividend for very long at all, so we can’t really make a judgement on how stable the dividend has been. This doesn’t mean that the company can’t pay a good dividend, but just that we want to wait until it can prove itself.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that T-Mobile US has grown earnings per share at 16% per year over the past five years. T-Mobile US definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
We Really Like T-Mobile US’ Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we’ve picked out 3 warning signs for T-Mobile US that investors should know about before committing capital to this stock. Is T-Mobile US not quite the opportunity you were looking for? Why not check out 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.
