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Readers hoping to buy Hellenic Telecommunications Organization S.A. (ATH:HTO) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company’s books on the record date. In other words, investors can purchase Hellenic Telecommunications Organization’s shares before the 25th of June in order to be eligible for the dividend, which will be paid on the 2nd of July.
The company’s upcoming dividend is €0.68 a share, following on from the last 12 months, when the company distributed a total of €0.68 per share to shareholders. Based on the last year’s worth of payments, Hellenic Telecommunications Organization has a trailing yield of 4.5% on the current stock price of €15.065. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for Hellenic Telecommunications Organization
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Hellenic Telecommunications Organization distributed an unsustainably high 143% of its profit as dividends to shareholders last year. Without extenuating circumstances, we’d consider the dividend at risk of a cut. 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. Thankfully its dividend payments took up just 44% of the free cash flow it generated, which is a comfortable payout ratio.
It’s disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Hellenic Telecommunications Organization fortunately did generate enough cash to fund its dividend. Still, if the company repeatedly paid a dividend greater than its profits, we’d be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we’re encouraged by the steady growth at Hellenic Telecommunications Organization, with earnings per share up 8.9% on average over the last five years.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Hellenic Telecommunications Organization has lifted its dividend by approximately 19% a year on average. It’s encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Final Takeaway
Is Hellenic Telecommunications Organization worth buying for its dividend? Hellenic Telecommunications Organization has been steadily growing its earnings per share, and it is paying out just 44% of its cash flow but an uncomfortably high 143% of its income. All things considered, we are not particularly enthused about Hellenic Telecommunications Organization from a dividend perspective.
So if you want to do more digging on Hellenic Telecommunications Organization, you’ll find it worthwhile knowing the risks that this stock faces. In terms of investment risks, we’ve identified 4 warning signs with Hellenic Telecommunications Organization and understanding them should be part of your investment process.
If you’re in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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This article by Simply Wall St is general in nature. 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.
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