Understanding the Dividend Dynamics of Telefonica SA
Telefonica SA(TEF, Financial) recently announced a dividend of $0.16 per share, payable on 2024-01-03, with the ex-dividend date set for 2023-12-12. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Telefonica SA's dividend performance and assess its sustainability.
What Does Telefonica SA Do?
Telefonica operates mobile and fixed networks in Spain (where it is the incumbent telephone operator), the U.K., Germany, Brazil, and other Latin American countries like Colombia, Mexico, Argentina, and Chile, among others. The company derives more than 30% of its revenue from Spain, close to 20% from Germany and 20% from Brazil. Its U.K. operations are held through a joint venture with Virgin Media. For several years, Telefonica has been simplifying its corporate structure by selling noncore assets.
A Glimpse at Telefonica SA's Dividend History
Telefonica SA has maintained a consistent dividend payment record since 2003. Dividends are currently distributed on a bi-annual basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Telefonica SA's Dividend Yield and Growth
As of today, Telefonica SA currently has a 12-month trailing dividend yield of 7.52% and a 12-month forward dividend yield of 7.50%. This suggests an expectation of decreased dividend payments over the next 12 months.
Over the past three years, Telefonica SA's annual dividend growth rate was -9.30%. Extended to a five-year horizon, this rate increased to -5.40% per year. And over the past decade, Telefonica SA's annual dividends per share growth rate stands at -5.80%.
Based on Telefonica SA's dividend yield and five-year growth rate, the 5-year yield on cost of Telefonica SA stock as of today is approximately 5.70%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-09-30, Telefonica SA's dividend payout ratio is 1.11, which may suggest that the company's dividend may not be sustainable.
Telefonica SA's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Telefonica SA's profitability 7 out of 10 as of 2023-09-30, suggesting good profitability prospects. The company has reported positive net income for each year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Telefonica SA's growth rank of 7 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Telefonica SA's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Telefonica SA's revenue has increased by approximately -6.00% per year on average, a rate that underperforms than approximately 80.59% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Telefonica SA's earnings increased by approximately 75.10% per year on average, a rate that underperforms than approximately 4.85% of global competitors.
Final Considerations for Investors
When assessing Telefonica SA's dividend profile, investors must weigh the company's historical commitment to dividends against the recent downward trend in growth rates and the high payout ratio. While the profitability rank and growth metrics present a mixed picture, they highlight the importance of ongoing evaluation of the company's financial health and market position. Value investors may find Telefonica SA an interesting case for further research, considering the potential for dividend income coupled with the need for vigilance regarding the sustainability of these payments.
GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
