Ericsson's Ex-Dividend Implications for Long-Term Investors

For long-term investors, Ericsson's (ERIC) dividend strategy and financial health present a nuanced landscape of opportunities and risks. As the company approaches its second ex-dividend date of 2025 on September 29—paying SEK 1.42 per shareDividend - Ericsson^[2]—it is critical to assess how its dividend sustainability and valuation dynamics align with broader market conditions and operational performance.

Dividend Sustainability: A Dual Lens

Ericsson's dividend payout ratio for 2025 stands at 53.91% of net incomeDividend - Ericsson^[2], a figure that appears elevated but is tempered by a significantly lower free cash flow payout ratio of 24.04%Dividend - Ericsson^[2]. This divergence highlights a key strength: while the company is distributing a substantial portion of its reported earnings, it retains ample liquidity, as free cash flow remains robust. This flexibility is crucial for maintaining dividend stability amid economic uncertainties.

Recent financial results underscore this resilience. In Q2 2025, Ericsson reported a net income of SEK 4.6 billion, reversing a SEK 11 billion loss in the same period of 2024Ericsson Q2 2025: Profit Rebounds, Gross Margin Hits 48%^[4]. Free cash flow, though slightly volatile (SEK 2.7 billion in Q1 and SEK 2.6 billion in Q2 2025Ericsson Debt to Equity Ratio 2010-2025 | ERIC - Macrotrends^[1]), remains sufficient to support its semiannual dividend structure. The company's strategic pivot toward software-centric solutions and operational efficiencies has also bolstered its adjusted gross margin to 48% in Q2 2025Ericsson Q2 2025: Profit Rebounds, Gross Margin Hits 48%^[4], further strengthening its financial foundation.

However, the debt-to-equity ratio offers a cautionary note. As of June 30, 2025, Ericsson's debt-to-equity ratio was 0.35Ericsson Debt to Equity Ratio 2010-2025 | ERIC - Macrotrends^[1], a marked improvement from 0.39 in March 2025. Yet, Q2 2025 figures suggest a discrepancy, with some reports citing a ratio of 0.7Dividend - Ericsson^[2], likely due to differing methodologies (e.g., inclusion of short-term liabilities). While the company remains within a manageable leverage range, investors must monitor how debt management aligns with its dividend commitments.

Valuation Opportunities Post-Ex-Dividend

The ex-dividend date on September 29, 2025, will trigger a typical market adjustment. Historical data indicates a 1.85% dip in Ericsson's stock price on ex-dividend datesEricsson (ERIC) Dividend History & Growth - 2025^[3], reflecting the standard drop equivalent to the dividend amount. For instance, the stock closed at $8.13 on September 25, 2025Dividend - Ericsson^[2], and is expected to adjust downward post-ex-dividend, creating a potential entry point for income-focused investors.

However, a backtest of ex-dividend events from 2022 to 2025 reveals that the stock's performance post-ex-dividend has been mixed. While the immediate price drop aligns with historical patterns, the average price drift turned negative beyond the first trading week and remained weak through day 30Ericsson Debt to Equity Ratio 2010-2025 | ERIC - Macrotrends^[1]. Neither cumulative returns nor win rates reached statistical significance at conventional levels, suggesting limited predictive power for long-term outcomesDividend - Ericsson^[2].

Long-term valuation opportunities also hinge on Ericsson's dividend yield and growth trajectory. The trailing twelve-month (TTM) yield of 2.70%Ericsson Debt to Equity Ratio 2010-2025 | ERIC - Macrotrends^[1] is attractive, particularly when compared to its 5-year average of 2.50%Ericsson Q2 2025: Profit Rebounds, Gross Margin Hits 48%^[4]. While the company's Dividends Per Share Growth Rate of 0.416% over five yearsEricsson Debt to Equity Ratio 2010-2025 | ERIC - Macrotrends^[1] is modest, its strong Dividend Sustainability Score (DSS) signals confidence in maintaining current payoutsEricsson Debt to Equity Ratio 2010-2025 | ERIC - Macrotrends^[1]. This stability is further reinforced by Ericsson's focus on operational efficiency and its ability to navigate macroeconomic headwinds, such as trade tensions and sector-specific challenges in telecommunications.

Strategic Considerations for Investors

For long-term investors, the key lies in balancing Ericsson's dividend sustainability with its valuation dynamics. The company's semiannual payout structure—splitting the 2024 dividend into two installments of SEK 1.43 and SEK 1.42 per shareEricsson (ERIC) Dividend History & Growth - 2025^[3]—provides consistent income streams while mitigating the risk of overexposure to a single payout. However, investors should remain vigilant about potential risks, including sector volatility and global economic shifts, which could impact Ericsson's ability to sustain its payout ratio.

In conclusion, Ericsson's ex-dividend date on September 29, 2025, represents both a milestone and an opportunity. The company's strong free cash flow, improving profitability, and disciplined debt management position it as a resilient dividend player. For investors, the post-ex-dividend period offers a chance to reassess entry points while leveraging Ericsson's commitment to shareholder returns. As always, a diversified approach and close monitoring of macroeconomic indicators will be essential to navigating this landscape effectively.