Last update on 2024-06-27

Telenor (TEQA.F) - Dividend Analysis (Final Score: 5/8)

Telenor (TEQA.F) dividend analysis shows a 5/8 score, assessing performance and stability using 8 criteria. Learn more about its dividend history and trends.

Short Analysis - Dividend Score: 5

We're running Telenor (TEQA.F) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield is the ratio of a company's annual dividend compared to its share price. It is a key metric for investors assessing the income-generating potential and the risk associated with an investment. A higher dividend yield might suggest a better return on investment but can also indicate potential financial distress or a declining stock price.

Telenor's dividend yield of 0.764% in 2023 is considerably lower than the industry average of 3.56%. Examining the historical data, Telenor has only started providing dividends in 2022 with a yield of 1.0577%. Relative to the industry, Telenor's current yield seems relatively poor. Telenor's stock price has also fluctuated, closing at 8.30 EUR in 2022 and 9.85 EUR in 2023. This lower dividend yield could be due to its relatively higher stock price or strategic reinvestment decisions. While a lower dividend yield can be concerning for dividend-focused investors, it might mean that Telenor is focusing on growth or other financial strategies. However, for now, this trend is not favorable for income-seeking investors.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate is crucial in assessing the company's ability to increase its payouts to shareholders over a long period. A growth rate higher than 5% signifies a strong and growing business.

Based on the data provided, Telenor has not paid out any dividend over the last 20 years. The values for the dividend per share ratio are zeros up until 2023, where there is a notable negative value of -8.2955. The average dividend ratio over this period is -0.3950, which is concerning. This indicates that the company has not been consistent in providing dividends to its shareholders and has only recently recorded a negative figure. This trend is detrimental to potential and existing shareholders who may prefer companies with a reliable and growing dividend payout history.

Average annual Payout Ratio lower than 65% in the last 20 years?

Evaluate whether Telenor's average payout ratio is below 65%, using historical data as a benchmark. A lower ratio generally indicates financial health and sustainability.

Based on the provided data, Telenor's payout ratio for the last 20 years demonstrates a significant increase only in the last two years. Prior to that, the payout ratio was 0%, indicating no dividends were paid out for an extended period. This is atypical for a company of Telenor's stature. The average payout ratio over this period stands at approximately 0.55%, which is well below the 65% threshold. The recent surge in payout ratio—2.88% in 2022 and 8.57% in 2023—still remains substantially within the acceptable range. Such a trend is indicative of a company that has been incredibly conservative with its dividend payouts until recently. While this cautious approach has its advantages, stakeholders might be cautious about the abrupt change. Nevertheless, in terms of financial health and sustainability, staying well under the 65% benchmark is favorable.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings. It is important to consider because it indicates whether the company generates enough profits to support its dividend payouts without compromising financial stability.

Analyzing Telenor's dividend coverage by earnings per share (EPS) over the years, it's notable that dividend payments only started in 2023, with a Dividend per Share value of EUR 0.8479. In that same year, the EPS was EUR 9.8979, providing a coverage ratio of approximately 0.086. While the dividends are undoubtedly covered by the earnings, a coverage ratio well below 1 indicates that Telenor is extremely conservative in its dividend policy. A strong EPS yet minimal dividend payout suggests robust earnings capacity, and with significant retained earnings, the company can sustain and potentially grow its dividends. This trend is favorable and highlights Telenor's prudent financial management and capacity for shareholder returns.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow is a measure of a company's capacity to sustain its dividend payouts. This is important because it indicates whether a firm generates enough cash flow to cover its dividend without resorting to other financing methods, such as debt.

By examining Telenor's free cash flow and dividend payout amounts from 2003 to 2023, we observe fluctuating coverage ratios. A ratio of 1 or higher indicates well-covered dividends, while a ratio below 1 suggests potential sustainability issues. Telenor had several years where the ratio fell below 1, particularly 2005, 2006, and 2018 with ratios of approximately 0.35, 0.30, and 0.49 respectively. Although the recent trend shows improvement with a ratio of 0.90 in 2023, the historical volatility could still raise concerns. This mix of coverage ratios signals periods where Telenor's dividends were not adequately covered by cash flow. Reducing dividend liability or improving cash flow generation could stabilize future payout safety.

Stable Dividends Since the Company Began Paying Dividends?

The stability of dividends over the past 20 years indicates financial robustness and consistent income generation for investors.

The data shows that Telenor (TEQA.F) had zero dividends per share for the first nineteen years and only started paying dividends from 2022, with a dividend of 0.9246 in that year and 0.8479 in 2023. This already represents a decline of more than 20% (around 8.3%) in just the second year of payments. Given that the dividends history is very recent and already showing a decrease, this trend is unfavorable for income-seeking investors desiring stable and reliable dividend income. These recent drops can signal potential inconsistency and raise concerns about the company's future dividend stability, which might deter those looking for long-term steady income generation through dividends.

Dividends Paid for Over 25 Years?

Analyzing if a company has paid dividends for over 25 years helps evaluate its reliability and consistency in returning shareholder value.

Telenor (TEQA.F) has a limited history of paying dividends, with the first record of dividends only appearing in the financial year 2022 with a per share dividend of EUR 0.9246 and slightly declining to EUR 0.8479 in 2023. The absence of dividend payments for over two decades (1999-2021) suggests that Telenor either did not prioritize dividends or was reinvesting its earnings back into the business during this period. This limited dividend history does not currently indicate a strong, consistent trend of returning value to shareholders through dividends. This trend is generally considered unfavorable for long-term dividend-focused investors looking for stability and predictability.

Reliable Stock Repurchases Over the Past 20 Years?

Explaining the significance and rationale behind considering Reliable Stock Repurchases for Telenor.

Over the past 20 years, Telenor has actively repurchased shares in numerous years, as evidenced by the average annual reduction of shares. This trend is indicative of the company's confidence in its own stock value and can be seen as a positive sign for investors, so overall the repurchase amounts to an annual average change of -1.2221%. This consistent reduction in outstanding shares increases the ownership stake for remaining shareholders, which, all else equal, should result in higher earnings per share and potentially higher dividends. However, it’s noteworthy that the most reliable years for repurchases exclude some key periods like 2016 and 2022, and the actual number of shares repurchased has varied.