Nokian Renkaat Oyj (HEL:TYRES) Is Paying Out A Dividend Of €0.35

The board of Nokian Renkaat Oyj (HEL:TYRES) has announced that it will pay a dividend of €0.35 per share on the 15th of May. This means the annual payment is 6.1% of the current stock price, which is above the average for the industry.

See our latest analysis for Nokian Renkaat Oyj

Nokian Renkaat Oyj's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. Paying out such a large dividend compared to earnings while also not generating free cash flows is a major warning sign for the sustainability of the dividend as these levels are certainly a bit high.

Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 63%, which is in a comfortable range for us.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the annual payment back then was €1.45, compared to the most recent full-year payment of €0.55. The dividend has shrunk at around 9.2% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Nokian Renkaat Oyj's EPS has fallen by approximately 47% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

We're Not Big Fans Of Nokian Renkaat Oyj's Dividend

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Nokian Renkaat Oyj make more consistent payments in the future. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. The dividend doesn't inspire confidence that it will provide solid income in the future.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Nokian Renkaat Oyj that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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