Understanding the Dividend Profile, Yield, and Growth Rates of Telefonaktiebolaget L M Ericsson (ERIC, Financial)
Telefonaktiebolaget L M Ericsson (ERIC) recently announced a dividend of $0.13 per share, payable on 2023-10-04, with the ex-dividend date set for 2023-09-28. 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 deep dive into Telefonaktiebolaget L M Ericssons dividend performance and assess its sustainability.
What Does Telefonaktiebolaget L M Ericsson Do?
Ericsson provides telecom equipment and services that are primarily used to build and facilitate mobile networks. Its customers have historically been primarily wireless carriers, but the firm is making a push to cater more to other enterprises as well, both as they try to take advantage of 5G capabilities and on other "as-a-service" communications platforms. The company also licenses its patents to handset manufacturers so their devices are compatible with wireless networks. Ericsson's three major operating segments are networks, cloud and software services, and enterprise.
A Glimpse at Telefonaktiebolaget L M Ericsson's Dividend History
Telefonaktiebolaget L M Ericsson has maintained a consistent dividend payment record since 2005. Dividends are currently distributed on a bi-annually basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Telefonaktiebolaget L M Ericsson's Dividend Yield and Growth
As of today, Telefonaktiebolaget L M Ericsson currently has a 12-month trailing dividend yield of 5.02% and a 12-month forward dividend yield of 5.25%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, Telefonaktiebolaget L M Ericsson's annual dividend growth rate was 35.70%. Extended to a five-year horizon, this rate decreased to 22.40% per year. And over the past decade, Telefonaktiebolaget L M Ericsson's annual dividends per share growth rate stands at -6.30%.
Based on Telefonaktiebolaget L M Ericsson's dividend yield and five-year growth rate, the 5-year yield on cost of Telefonaktiebolaget L M Ericsson stock as of today is approximately 13.79%.
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 2023-06-30, Telefonaktiebolaget L M Ericsson's dividend payout ratio is 0.72. And this may suggest that the company's dividend may not be sustainable.
Telefonaktiebolaget L M Ericsson's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Telefonaktiebolaget L M Ericsson's profitability 7 out of 10 as of 2023-06-30, suggesting good profitability prospects. The company has reported net profit in 8 years out of past 10 years.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Telefonaktiebolaget L M Ericsson'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 Telefonaktiebolaget L M Ericsson's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Telefonaktiebolaget L M Ericsson's revenue has increased by approximately 6.00% per year on average, a rate that outperforms than approximately 54.89% 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, Telefonaktiebolaget L M Ericsson's earnings increased by approximately 103.20% per year on average, a rate that outperforms than approximately 95.18% of global competitors.
Next Steps
Telefonaktiebolaget L M Ericsson's robust dividend yield and growth rates, combined with its solid profitability and growth metrics, make it an attractive option for investors seeking stable income. However, the high payout ratio suggests that the sustainability of its dividends may be a concern. Therefore, investors need to consider these factors and monitor the company's performance closely. GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
