Deutsche Telekom Earnings: Outperforms Peers; Dividend Up 10%, Which Offers Maintainable 3.5% Yield

Narrow-moat Deutsche Telekom continues to outperform its European telecommunication peers. Shares are up 14% year to date supported by healthy revenue and EBITDA after leases performance in the U.S. and Germany. Management announced a dividend increase of 10%, from EUR 0.70 to EUR 0.77 per share, which represents a 3.5% yield. More importantly, this dividend yield is maintainable and we expect Deutsche Telekom will continue to raise dividends in the future due to its exposure to healthy markets. More importantly, this dividend yield is maintainable and we expect Deutsche Telekom will continue to raise dividends in the future due to its exposure to healthy markets, good cost management, and strong strategic execution. We remind investors that we assign Deutsche Telekom an Exemplary Morningstar Capital Allocation Rating. We maintain our EUR 25 fair value estimate, with shares offering 15% upside at this point.