TELKOM INDONESIA PERSERO-ADR (NYSE:TLK) – A High-Yield Dividend Stock with Strong Profitability and Financial Health

When assessing dividend stocks, investors typically look for a mix of yield, stability, and financial soundness. The "Best Dividend Stocks" tool on ChartMill selects companies with a high ChartMill Dividend Rating (≥7), confirming strong dividend traits, while also setting a minimum Profitability Rating (≥5) and Health Rating (≥5) to exclude financially weak or unprofitable firms. This method focuses on dependable income while maintaining the company’s fundamental strength.

One stock that fits these standards is TELKOM INDONESIA PERSERO-ADR (NYSE:TLK), an Indonesian telecom company with a steady dividend history, good profitability, and decent financial standing.

Why TLK Appeals to Dividend Investors

1. High Dividend Yield and Consistent Payments

• Strong Dividend Yield (7.67%): TLK provides a yield significantly higher than the industry average (4.92%) and the S&P 500 average (2.35%), attracting income-focused investors.
• Established Dividend History: The company has distributed dividends for at least 10 years, showing a dedication to shareholder returns.
• Moderate Dividend Growth (1.73%): Though not rapid, the dividend has increased slightly over time, supported by earnings growth.

Investors should be aware that TLK’s payout ratio (75.55%) is relatively high, which could be a concern if earnings slow. However, the company’s solid profitability helps reduce this risk.

2. High Profitability Ensures Dividend Reliability

TLK’s ChartMill Profitability Rating of 8 highlights its consistent earnings:

• Healthy Margins: The company has an Operating Margin of 27.78% (better than 93.94% of peers) and a Profit Margin of 15.69% (ahead of 84.85% of the industry).
• Effective Investment Returns: With a Return on Invested Capital (ROIC) of 13.74%, TLK efficiently turns investments into profits, supporting dividend consistency.

These factors are vital for dividend investors, as strong profitability helps sustain and possibly increase payouts over time.

3. Good Financial Health with Minor Liquidity Issues

TLK’s ChartMill Health Rating of 6 reflects reasonable financial stability, though with some liquidity challenges:

• Controlled Debt Levels: A Debt-to-Equity ratio of 0.34 indicates manageable borrowing, better than 81.82% of industry peers.
• Strong Debt Repayment Ability: The company’s Debt-to-Free Cash Flow ratio (1.87) is favorable, meaning it could clear debt quickly if necessary.
• Liquidity Concerns: A Current Ratio of 0.89 suggests short-term liquidity issues, though strong cash flows and profitability help balance this.

While liquidity metrics are not perfect, TLK’s overall financial condition supports dividend continuity.

Final Thoughts: A Strong Dividend Pick with Minor Concerns

TLK is an attractive option for dividend investors, offering a high yield supported by solid profitability and decent financial health. Although the payout ratio and liquidity factors need attention, the company’s history and efficient operations indicate dividends should remain steady.

For more high-quality dividend stock ideas, check out the complete Best Dividend Stocks screen to find other stocks meeting similar criteria.

Disclaimer: This article is not investment advice. Always conduct your own research or consult a financial advisor before making investment decisions.