Revealed on February twenty second, 2024 by Bob Ciura
The Dividend Kings include firms which have raised their dividends for not less than 50 years in a row. Due to their unparalleled streak of annual dividend will increase, it is not uncommon to view the Dividend Kings as among the many finest dividend progress shares within the inventory market.
You may see the complete 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 may obtain the complete checklist of Dividend Kings by clicking on the hyperlink beneath:
Phone & Knowledge Methods (TDS) lately elevated its dividend for the fiftieth consecutive yr. Consequently, 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 & Knowledge Methods is a telecommunications firm that gives prospects with mobile and landline companies, wi-fi merchandise, cable, broadband, and voice companies throughout the US. The corporate’s Mobile Division accounts for greater than 75% of complete working income. TDS began in 1969 as a set of 10 rural phone firms. At this time 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 web 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 complete yr 2023. Mounted 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 primarily depends on this stake to realize progress.
Lately, U.S. Mobile targeted on connecting prospects in under-served areas with their high-quality community, in addition to market share enlargement, rising enterprise with authorities prospects in 5G and IoT, and bettering 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 direction of rising its consumer base, increasing into new territories, in addition to bettering 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 making an attempt to construct out its choices in broadband service by means of its fiber infrastructure, which helps ship quicker and extra dependable web to residences in its service space.
Working income has been roughly flat for a while, and we count on it’s going to stay as such for the foreseeable future. Whereas TDS is making an attempt to take a position for progress, we imagine the corporate is dealing with an uphill battle in the case of rising earnings within the years to come back. 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 kinds in its service areas. Broadband operators are likely to have service areas analogous to energy utilities in that alternative for shoppers is often restricted. That may assist shield TDS’ internet-based income over time, however we see much less of a worth proposition for shoppers on wi-fi income.
Customers have far more alternative in the case of wi-fi income, and whereas TDS hasn’t confronted a consumer exodus, progress is low and we attribute that to the extraordinary competitors within the wi-fi service house. The actual fact is that Verizon and AT&T have scale benefits that TDS doesn’t, and we predict that its aggressive place is probably in danger because of this.
To its credit score, TDS has weathered a number of recessions up to now, elevating its dividend by means of 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 should not essentially beholden to financial situations. Relatively, TDS is extra inclined to company-specific danger elements, as mentioned above.
Valuation & Anticipated Returns
To worth TDS, we can not use EPS as the corporate reported a internet loss for 2023. Due to this fact, we’ll use ebook worth per share as a proxy for EPS, and price-to-book ratio as a substitute of P/E. Utilizing the present share value of ~$14 and ebook 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 honest worth at a P/B ratio of 0.45 by 2029. Nonetheless, an enlargement of the valuation a number of might increase annual returns by 8.4% per yr over the following 5 years.
Individually, estimated enterprise progress of two% will increase shareholder returns. Lastly, the inventory has a 5.3% present dividend yield.
Placing all of it collectively, TDS is anticipated 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 yr on common over the previous 5 years. At this time, its 5.3% dividend yield is considerably larger than the yield of the S&P. Nonetheless, the dividend will not be backed by constructive 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 at present its most essential progress driver, any headwind that will present up in the best way of U.S. Mobile will have an effect on TDS.
In different phrases, there isn’t any assure that TDS will be capable of proceed its dividend improve streak indefinitely, given its destructive EPS and cloudy progress outlook.
Closing Ideas
TDS depends on the efficiency of U.S. Mobile, and it’s now present process a strategic evaluate to find out its finest plan of action to unlock shareholder worth, which might consequence within the sale of the corporate or its property. TDS inventory might nonetheless provide sturdy annual return potential over the following 5 years.
We at present charge TDS inventory a purchase as a result of its excessive projected returns, though we acknowledge the excessive stage of danger to the dividend and the volatility of the corporate’s outcomes.
Different Certain Dividend Sources
Thanks for studying this text. Please ship any suggestions, corrections, or inquiries to [email protected].