KONE Oyj (HEL:KNEBV) Is Due To Pay A Dividend Of €1.75

The board of KONE Oyj (HEL:KNEBV) has announced that it will pay a dividend on the 11th of March, with investors receiving €1.75 per share. This means that the annual payment will be 3.8% of the current stock price, which is in line with the average for the industry.

View our latest analysis for KONE Oyj

KONE Oyj's Earnings Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, the company was paying out 98% of what it was earning. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Earnings per share is forecast to rise by 28.6% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 80% - on the higher side, but we wouldn't necessarily say this is unsustainable.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was €1.53 in 2014, and the most recent fiscal year payment was €1.75. This means that it has been growing its distributions at 1.4% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

KONE Oyj May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Although it's important to note that KONE Oyj's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. The earnings growth is anaemic, and the company is paying out 98% of its profit. This gives limited room for the company to raise the dividend in the future.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The track record isn't great, and the payments are a bit high to be considered sustainable. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for KONE Oyj that investors need to be conscious of moving forward. 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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.