Nokian Renkaat Oyj (HEL:TYRES) Will Pay A Dividend Of €0.25

The board of Nokian Renkaat Oyj (HEL:TYRES) has announced that it will pay a dividend of €0.25 per share on the 20th of May. The yield is still above the industry average at 3.7%.

See our latest analysis for Nokian Renkaat Oyj

Nokian Renkaat Oyj's Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate Nokian Renkaat Oyj's Could Struggle to Maintain Dividend Payments In The Future

Nokian Renkaat Oyj's Future Dividends May Potentially Be At Risk

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Even though Nokian Renkaat Oyj is not generating a profit, it is still paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

Earnings per share is forecast to rise exponentially over the next year. If recent patterns in the dividend continues, we would start to get a bit worried, with the payout ratio possibly reaching 122%.

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. The dividend has gone from an annual total of €1.45 in 2015 to the most recent total annual payment of €0.25. Dividend payments have fallen sharply, down 83% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited Growth Potential

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Nokian Renkaat Oyj's earnings per share has shrunk at 54% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Nokian Renkaat Oyj's Dividend Doesn't Look Great

In summary, it's not great to see that the dividend is being cut, but it is probably understandable given that the current payment level was quite high. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Overall, this doesn't get us very excited from an income standpoint.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Nokian Renkaat Oyj that investors should take into consideration. Is Nokian Renkaat Oyj not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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