The Best Dividend Stocks screen is designed to highlight companies that combine a strong dividend profile with sufficient profitability and financial health. The idea is that a high dividend yield alone is not enough; the underlying business needs to be solid enough to sustain and grow that payout over time. The screen sets minimum thresholds for the ChartMill Dividend Rating (7 or higher), Profitability Rating (5 or higher), and Health Rating (5 or higher), alongside filters for liquidity and price to avoid the most volatile or speculative names. Telkom Indonesia Persero (NYSE:TLK) is one of the stocks that emerges from this filtering process, and its fundamentals offer a clear picture of why it makes the cut.
Dividend Profile: High Yield with a Track Record
The primary attraction of Telkom Indonesia for dividend investors is its outstanding dividend metrics. The stock offers a yearly dividend yield of 8.39%, which is not only far above the industry average of 2.11% but also significantly higher than the S&P 500 average. This yield places it in the top tier of its peer group, outperforming nearly 95% of companies in the Diversified Telecommunication Services industry.
Beyond the headline yield, the dividend also has a solid growth history. The company has been paying a dividend for at least ten years, providing a reliable track record, and has grown its dividend at an annual rate of 6.64%. This combination of a high current yield and a history of consistent increases is a strong signal for income-focused strategies.
However, a key metric to watch closely is the payout ratio. At 128.74%, Telkom Indonesia is currently paying out more in dividends than it earns in net income. This is flagged as a negative point in the fundamental report and is a natural concern for sustainability. On a more positive note, the report also indicates that earnings are growing faster than the dividend, which over time should help bring the payout ratio back down to a more comfortable level. This tension between a high payout ratio and accelerating earnings growth is the central dynamic to evaluate.
Profitability and Health: The Supporting Cast
For a dividend to be sustainable over the long term, the company must be consistently profitable and financially sound. Telkom Indonesia scores well on the profitability front, with a ChartMill Profitability Rating of 7 out of 10. The company has a long history of positive earnings and operating cash flow, which forms the bedrock of any dividend payment. Its return on invested capital (ROIC) of 11.80% is among the best in its industry, significantly outperforming the industry average and demonstrating that the company is efficiently generating profits from its capital base.
The financial health picture is more nuanced, reflected in a Health Rating of 5 out of 10, which is right at the screen's minimum threshold. The solvency side looks strong: the company has a very manageable debt-to-equity ratio of 0.36 and a debt-to-free-cash-flow ratio of just 1.74. This suggests it could pay off all its debt in under two years using free cash flow, indicating low financial leverage and a low risk of distress.
The main weakness is on the liquidity side. A current ratio of 0.92 and a quick ratio of 0.91 both suggest that the company’s short-term assets do not fully cover its short-term liabilities. This is a common characteristic in the telecommunications industry, which tends to have high ongoing capital expenditure requirements. While this is something to be aware of, the strong free cash flow generation provides a buffer, and it does not necessarily point to an imminent problem.
Valuation and Context for the Dividend Investor
Telkom Indonesia also offers a valuation that complements its dividend profile. With a price-to-earnings (P/E) ratio of 16.25, the stock is cheaper than roughly 80% of its industry peers and the broader S&P 500. Its forward P/E drops to 11.21, based on expectations of stronger earnings growth ahead. This valuation means investors are not paying a premium for the high yield, and the stock is priced at a level that could provide a margin of safety.
The fundamental report notes that while past earnings have been under pressure, the outlook is for a significant acceleration in growth. This expected turnaround is an important part of the story, as it directly supports the case for the dividend’s long-term sustainability. A detailed breakdown of all these factors, including the complete evaluation of the dividend, profitability, and health ratings, can be found in the full fundamental analysis report for TLK.
The Bottom Line
Telkom Indonesia presents a classic high-yield opportunity that requires careful scrutiny. The upside is a market-leading dividend yield, a multi-year history of payouts, and a business that is both profitable and reasonably valued. The primary risk is the elevated payout ratio, which makes the dividend vulnerable to any earnings shortfall. The strategy behind the Best Dividend screen is to surface exactly these kinds of stocks—those where the yield is attractive but the company’s fundamentals provide a basis for deeper investigation. For a full list of other stocks that meet these same criteria, you can run the Best Dividend Stocks screener to see more results.
Disclaimer: This article is for informational and educational purposes only and does not constitute investment advice. All investments carry risk, and past performance is not a guarantee of future results.
Read full article here »
View the Zacks #1 Rank List
Telkom Indonesia (NYSE:TLK) Offers a High-Yield Dividend Opportunity With Solid Fundamentals
The Best Dividend Stocks screen is designed to highlight companies that combine a strong dividend profile with sufficient profitability and financial health. The idea is that a high dividend yield alone is not enough; the underlying business needs to be solid enough to sustain and grow that payout over time. The screen sets minimum thresholds for the ChartMill Dividend Rating (7 or higher), Profitability Rating (5 or higher), and Health Rating (5 or higher), alongside filters for liquidity and price to avoid the most volatile or speculative names. Telkom Indonesia Persero (NYSE:TLK) is one of the stocks that emerges from this filtering process, and its fundamentals offer a clear picture of why it makes the cut.
Dividend Profile: High Yield with a Track Record
The primary attraction of Telkom Indonesia for dividend investors is its outstanding dividend metrics. The stock offers a yearly dividend yield of 8.39%, which is not only far above the industry average of 2.11% but also significantly higher than the S&P 500 average. This yield places it in the top tier of its peer group, outperforming nearly 95% of companies in the Diversified Telecommunication Services industry.
Beyond the headline yield, the dividend also has a solid growth history. The company has been paying a dividend for at least ten years, providing a reliable track record, and has grown its dividend at an annual rate of 6.64%. This combination of a high current yield and a history of consistent increases is a strong signal for income-focused strategies.
However, a key metric to watch closely is the payout ratio. At 128.74%, Telkom Indonesia is currently paying out more in dividends than it earns in net income. This is flagged as a negative point in the fundamental report and is a natural concern for sustainability. On a more positive note, the report also indicates that earnings are growing faster than the dividend, which over time should help bring the payout ratio back down to a more comfortable level. This tension between a high payout ratio and accelerating earnings growth is the central dynamic to evaluate.
Profitability and Health: The Supporting Cast
For a dividend to be sustainable over the long term, the company must be consistently profitable and financially sound. Telkom Indonesia scores well on the profitability front, with a ChartMill Profitability Rating of 7 out of 10. The company has a long history of positive earnings and operating cash flow, which forms the bedrock of any dividend payment. Its return on invested capital (ROIC) of 11.80% is among the best in its industry, significantly outperforming the industry average and demonstrating that the company is efficiently generating profits from its capital base.
The financial health picture is more nuanced, reflected in a Health Rating of 5 out of 10, which is right at the screen's minimum threshold. The solvency side looks strong: the company has a very manageable debt-to-equity ratio of 0.36 and a debt-to-free-cash-flow ratio of just 1.74. This suggests it could pay off all its debt in under two years using free cash flow, indicating low financial leverage and a low risk of distress.
The main weakness is on the liquidity side. A current ratio of 0.92 and a quick ratio of 0.91 both suggest that the company’s short-term assets do not fully cover its short-term liabilities. This is a common characteristic in the telecommunications industry, which tends to have high ongoing capital expenditure requirements. While this is something to be aware of, the strong free cash flow generation provides a buffer, and it does not necessarily point to an imminent problem.
Valuation and Context for the Dividend Investor
Telkom Indonesia also offers a valuation that complements its dividend profile. With a price-to-earnings (P/E) ratio of 16.25, the stock is cheaper than roughly 80% of its industry peers and the broader S&P 500. Its forward P/E drops to 11.21, based on expectations of stronger earnings growth ahead. This valuation means investors are not paying a premium for the high yield, and the stock is priced at a level that could provide a margin of safety.
The fundamental report notes that while past earnings have been under pressure, the outlook is for a significant acceleration in growth. This expected turnaround is an important part of the story, as it directly supports the case for the dividend’s long-term sustainability. A detailed breakdown of all these factors, including the complete evaluation of the dividend, profitability, and health ratings, can be found in the full fundamental analysis report for TLK.
The Bottom Line
Telkom Indonesia presents a classic high-yield opportunity that requires careful scrutiny. The upside is a market-leading dividend yield, a multi-year history of payouts, and a business that is both profitable and reasonably valued. The primary risk is the elevated payout ratio, which makes the dividend vulnerable to any earnings shortfall. The strategy behind the Best Dividend screen is to surface exactly these kinds of stocks—those where the yield is attractive but the company’s fundamentals provide a basis for deeper investigation. For a full list of other stocks that meet these same criteria, you can run the Best Dividend Stocks screener to see more results.
Disclaimer: This article is for informational and educational purposes only and does not constitute investment advice. All investments carry risk, and past performance is not a guarantee of future results.
Read full article here »