Last update on 2024-06-27

T-Mobile US (TMUS) - Dividend Analysis (Final Score: 2/8)

T-Mobile US (TMUS) dividend analysis reveals a low dividend score of 2/8, indicating inconsistency and unsustainable practices for income-focused investors.

Short Analysis - Dividend Score: 2

We're running T-Mobile US (TMUS) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

T-Mobile US (TMUS) scores very low in terms of its dividend policy performance and stability, based on an 8-criteria scoring system. Key points include: 1. TMUS's dividend yield of 0.4054% is much lower than the industry average of 3.56%. 2. TMUS has a negative average dividend growth rate of -9.5238% over the last 20 years. 3. The average payout ratio for TMUS is very high at 378.07%, which is unsustainable. 4. Dividends have generally not been well-covered by earnings except for some specific years. 5. Dividend stability is very poor with only sporadic payments. 6. They have not consistently paid dividends for over 25 years. 7. Dividend payments do not appear to be a main focus for TMUS. 8. Stock repurchases have also been inconsistent.

Insights for Value Investors Seeking Stable Income

As an investor looking for stable and consistent dividends, T-Mobile US (TMUS) may not be the best option. Their inconsistent dividend payments and high payout ratios suggest that dividends are not a priority for the company. Instead, TMUS seems to focus more on reinvesting earnings into business growth and stock price appreciation. If you're seeking regular dividend income, it might be worth considering other companies with a stronger dividend track record.

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 measures the annual dividends paid out per share as a percentage of the share price.

The dividend yield of T-Mobile US (TMUS) at 0.4054% is significantly lower than the industry average of 3.56%. Historically, TMUS has shown sporadic dividend payments, with notable yields only in 2013 and 2015, both of which didn't sustain. Most recently in 2023, the yield was 0.4054%, suggesting a cautious and sparse dividend strategy. Meanwhile, the industry average has remained above 2% for the last two decades, indicating consistent dividend payouts by peer companies. This discrepancy signals TMUS's divergence in prioritizing dividend payouts, possibly due to greater focus on reinvesting earnings back into the business or other strategic avenues, unlike its industry counterparts. Moreover, it could indicate that TMUS shareholders are more reliant on stock price appreciation for returns rather than dividends, which can be seen in the significant increases in stock price over the last several years.

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

The dividend growth rate measures the annualized percentage rate of growth of a company's dividend payments. This metric is important as it indicates a company's ability to generate increasing returns for shareholders over time.

T-Mobile US (TMUS) has a negative average dividend ratio of -9.5238% over the last 20 years, with dividend per share values largely at 0 and significant negative values in specific years like 2013 and 2016. This suggests that TMUS has not consistently paid dividends, and the negative values in 2013 and 2016 likely indicate either a reduction or complete suspension of dividends during those years. Consequently, TMUS does not meet the criterion of having a dividend growth rate higher than 5%, making it a poor candidate for dividend investors. This trend is negative and highlights a lack of commitment to return capital to shareholders via dividends.

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

The average payout ratio represents the percentage of earnings paid to shareholders as dividends. It is a crucial indicator of a company's dividend sustainability.

The average payout ratio of T-Mobile US over the last 20 years is significantly high at 378.07%, indicating that the company paid out more in dividends than its earnings, which is unsustainable in the long term. This high ratio, especially the extreme value in 2013, suggests potential financial distress or extraordinary payouts which are not normally expected. In contrast, a payout ratio lower than 65% typically indicates stable and sustainable dividends, which T-Mobile US does not meet.

Dividends Well Covered by Earnings?

A company's ability to cover its dividends with earnings is a sign of financial health and sustainability.

Looking at T-Mobile US's (TMUS) data, the Earnings per Share (EPS) have been oscillating over the past two decades, with notable peaks and troughs. The key criterion we're evaluating here is how well these earnings cover the company's dividends per share. Historically, T-Mobile US has not been consistent in paying out dividends, with many years having no dividends at all. Specifically, between 2010 and 2023, there were very few occurrences (2013, 2015, and 2023) where dividends were paid. Furthermore, in these few cases, dividends were either modest compared to the earnings or even non-existent despite positive earnings. For instance, in 2013, dividends per share accounted for approximately 78.53% of the EPS, but this wasn't a recurring scenario. Most years, the company retained its earnings or reinvested them rather than distributing them as dividends. For 2023, the dividend is approximately 9.26% of the EPS, showing a more cautious and sustainable approach. Overall, T-Mobile US seems to prioritize maintaining financial flexibility and investing back into the business over paying out dividends, which aligns with their growth-focused strategy. Thus, the trend of dividends being covered by earnings is generally good, reflecting conservative and sustainable financial management. However, potential investors seeking regular dividend income might find this trend less attractive.

Dividends Well Covered by Cash Flow?

what does it mean for a company to have dividends well covered by cash flow and why is it important

Covering dividends by cash flow indicates financial health. It's where a company uses its net cash generated from operations to pay dividends to shareholders. Analysts scrutinize this management aspect to assess the sustainability of dividend payouts. Consistently positive cash flow over dividend payouts is a hallmark of financially stable firms. Conversely, reliance on external financing for dividends can signal underlying cash flow issues, posing risks to shareholders.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years indicate consistency and reliability, vital qualities for attracting income-seeking investors. A stable dividend signals strong financial health and prudent management.

Reviewing T-Mobile US (TMUS)'s dividend payments over the last 20 years reveals inconsistency in distributions. For the majority of these years, TMUS did not pay any dividends, except in 2013 (which was a special dividend of $4.06), 2015 ($0.6875), and 2023 ($0.65). The absence of consistent dividend payouts and larger fluctuations suggests that TMUS lacks stability in dividend payments. The determination that there has not been a decrease of more than 20% is technically correct but somewhat misleading due to the overall infrequent nature of dividends. Therefore, T-Mobile US does not demonstrate dividend stability, and this trend would be considered unfavorable for income-oriented investors.

Dividends Paid for Over 25 Years?

Criterion focused on whether the company has consistently paid dividends for over 25 years.

Based on the report, T-Mobile US (TMUS) has not consistently paid dividends over the last 25 years. In fact, the data shows dividend payments in only three years: 2013 ($4.06 per share), 2015 ($0.6875 per share), and 2023 ($0.65 per share). This inconsistency indicates that dividend payments are not a primary mode of returning value to shareholders for TMUS, which can be a concern for income-focused investors.

Reliable Stock Repurchases Over the Past 20 Years?

Investors look for consistent share repurchases as they can reduce overall share count, increase EPS, and showcase management's confidence in the company's future.

T-Mobile US (TMUS) has had limited reliable stock repurchases in the last 20 years, with significant buybacks only in the years 2004, 2007, 2018, 2019, and 2023. The notable increases in share count during some years, like 2013 and 2018, suggest capital raises or stock issuance, which offsets buyback benefits. While averaging 26 million shares repurchased over 20 years, the inconsistency isn't a strong trend, reflecting a mixed signal for long-term shareholder value enhancement through repurchases.