Dissecting ERIC's Dividend Sustainability and Growth Prospects
Telefonaktiebolaget L M Ericsson (ERIC, Financial) recently announced a dividend of $0.13 per share, payable on a date yet to be announced, with the ex-dividend date set for 2024-04-04. 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 Telefonaktiebolaget L M Ericsson's dividend performance and assess its sustainability.
What Does Telefonaktiebolaget L M Ericsson Do?
Telefonaktiebolaget L M Ericsson provides telecom equipment and services that are primarily used to build and facilitate mobile networks through operations in three segments: networks, cloud and software services, and enterprises. The firm's 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.
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 4.75% and a 12-month forward dividend yield of 4.72%. This suggests an expectation of stable dividend payments over the next 12 months.
Over the past three years, Telefonaktiebolaget L M Ericsson's annual dividend growth rate was 21.60%. Extended to a five-year horizon, this rate increased to 25.70% per year. And over the past decade, Telefonaktiebolaget L M Ericsson's annual dividends per share growth rate stands at -3.80%.
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 14.91%.
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 2023-12-31, Telefonaktiebolaget L M Ericsson's dividend payout ratio is 0.26.
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 2023-12-31, suggesting good profitability prospects. The company has reported net profit in 7 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 4.20% per year on average, a rate that outperforms approximately 51.43% 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 decreased by approximately -46.50% per year on average, a rate that outperforms approximately 6.95% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 38.70%, which outperforms approximately 90.02% of global competitors.
Next Steps
In conclusion, Telefonaktiebolaget L M Ericsson's dividend payments, supported by a strong dividend growth rate and a conservative payout ratio, appear sustainable. The company's profitability and growth metrics, although showing some variability, generally suggest a positive outlook. These factors, combined with the company's strategic moves in the 5G space and beyond, position it as an attractive candidate for value investors seeking dividend income. As the telecom industry evolves, will Telefonaktiebolaget L M Ericsson continue to provide robust dividend returns? Investors should keep an eye on the company's financial health and industry developments to make informed decisions.
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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.
