Revealed on February twenty second, 2024 by Bob Ciura
The Dividend Kings encompass firms which have raised their dividends for at the very least 50 years in a row. Due to their unparalleled streak of annual dividend will increase, it’s common to view the Dividend Kings as among the many greatest dividend progress shares within the inventory market.
You possibly can see the total checklist of all 56 Dividend Kings right here.
We additionally created a full checklist of all Dividend Kings, together with related monetary statistics like dividend yields and price-to-earnings ratios. You possibly can obtain the total checklist of Dividend Kings by clicking on the hyperlink beneath:
Phone & Information Programs (TDS) just lately elevated its dividend for the fiftieth consecutive 12 months. In consequence, the corporate now joins the unique checklist of Dividend Kings.
This text will analyze the corporate’s enterprise overview, future progress prospects, aggressive benefits, and extra.
Enterprise Overview
Phone & Information Programs is a telecommunications firm that gives prospects with mobile and landline companies, wi-fi merchandise, cable, broadband, and voice companies throughout the USA. The corporate’s Mobile Division accounts for greater than 75% of complete working income. TDS began in 1969 as a group of 10 rural phone firms. As we speak the corporate has a market cap of $1.7 billion and greater than $5.4 billion in annual revenues.
TDS posted fourth-quarter earnings on February sixteenth. Quarterly income of $1.32 billion beat estimates by $40 million, whereas adjusted earnings-per-share got here to a lack of $0.11 per share. Income declined 3.2% from the 2022 fourth quarter. The online lack of $0.38 per share for the fourth quarter was due primarily to a $547 million non-cash impairment cost at TDS Telecom.
At US Mobile, postpaid common income per consumer grew 2% for the total 12 months 2023. Fastened wi-fi prospects grew 46% to 114,000 whereas tower rental revenues grew 8% to $100 million.
Together with quarterly outcomes, the corporate raised its dividend by 2.7% to $0.19 per share.
Development Prospects
TDS operates a really low-growth enterprise, as it’s a very small participant in a extremely aggressive business that’s dominated by Verizon and AT&T. That has led to repeated years of destructive earnings progress. TDS has an 82% stake in U.S. Mobile and basically depends on this stake to realize progress.
In recent times, U.S. Mobile targeted on connecting prospects in under-served areas with their high-quality community, in addition to market share enlargement, growing enterprise with authorities prospects in 5G and IoT, and enhancing community modernization and 5G packages.
TDS Telecom grew broadband income with a rise in buyer connections and expanded the attain of their fiber and 1Gig companies. TDS has made investments in the direction of rising its consumer base, increasing into new territories, in addition to enhancing their community applied sciences, in an effort to spice up the corporate’s competitiveness.
Nonetheless, rising working bills and impairments are taking a few of that benefit away over time, as we noticed with 2023 outcomes. Along with that, the corporate is attempting to construct out its choices in broadband service via its fiber infrastructure, which helps ship sooner and extra dependable web to residences in its service space.
Working income has been roughly flat for a while, and we anticipate it would stay as such for the foreseeable future. Whereas TDS is attempting to take a position for progress, we consider the corporate is going through an uphill battle in relation to rising earnings within the years to return. We estimate 2% annual EPS progress for the corporate over the following 5 years.
Aggressive Benefits & Recession Efficiency
TDS’ aggressive benefit, if it has one, is that it has a captive viewers of types in its service areas. Broadband operators are inclined to have service areas analogous to energy utilities in that alternative for customers is normally restricted. That may assist shield TDS’ internet-based income over time, however we see much less of a worth proposition for customers on wi-fi income.
Shoppers have way more alternative in relation to wi-fi income, and whereas TDS hasn’t confronted a consumer exodus, progress is low and we attribute that to the extreme competitors within the wi-fi service house. The very fact is that Verizon and AT&T have scale benefits that TDS doesn’t, and we expect that its aggressive place is probably in danger because of this.
To its credit score, TDS has weathered a number of recessions previously, elevating its dividend via all of them. Even when we get a recession in 2024, we don’t suppose that alone would put the dividend in danger, as the corporate’s income and earnings are usually not essentially beholden to financial situations. Relatively, TDS is extra vulnerable to company-specific danger components, as mentioned above.
Valuation & Anticipated Returns
To worth TDS, we can’t use EPS as the corporate reported a internet loss for 2023. Due to this fact, we’ll use guide worth per share as a proxy for EPS, and price-to-book ratio as a substitute of P/E. Utilizing the present share worth of ~$14 and guide worth per share of $47.90, the inventory trades with a price-to-book ratio of 0.30.
The ten-year common P/B ratio is 0.64, however we peg truthful worth at a P/B ratio of 0.45 by 2029. Nonetheless, an enlargement of the valuation a number of may enhance annual returns by 8.4% per 12 months over the following 5 years.
Individually, estimated enterprise progress of two% will enhance shareholder returns. Lastly, the inventory has a 5.3% present dividend yield.
Placing all of it collectively, TDS is predicted to return over 15% yearly over the following 5 years, making the inventory a purchase.
TDS has raised its dividend for 50 consecutive years. It has grown its dividend by ~3% per 12 months on common over the previous 5 years. As we speak, its 5.3% dividend yield is considerably larger than the yield of the S&P. Nonetheless, the dividend just isn’t backed by optimistic EPS, making it a comparatively dangerous dividend payout.
As TDS and U.S. Mobile function in a extremely aggressive enterprise, the company lacks a significant aggressive benefit. As U.S. Mobile generates the overwhelming majority of the revenues and earnings of TDS and is presently its most essential progress driver, any headwind which will present up in the best way of U.S. Mobile will have an effect on TDS.
In different phrases, there is no such thing as a assure that TDS will be capable of proceed its dividend improve streak indefinitely, given its destructive EPS and cloudy progress outlook.
Ultimate Ideas
TDS depends on the efficiency of U.S. Mobile, and it’s now present process a strategic evaluation to find out its greatest plan of action to unlock shareholder worth, which may outcome within the sale of the corporate or its property. TDS inventory may nonetheless provide sturdy annual return potential over the following 5 years.
We presently fee TDS inventory a purchase because of its excessive projected returns, though we acknowledge the excessive stage of danger to the dividend and the volatility of the corporate’s outcomes.
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