KONE Oyj (HEL:KNEBV) Is Paying Out A Larger Dividend Than Last Year

KONE Oyj (HEL:KNEBV) has announced that it will be increasing its dividend from last year's comparable payment on the 21st of March to €1.80. The payment will take the dividend yield to 3.6%, which is in line with the average for the industry.

Check out our latest analysis for KONE Oyj

KONE Oyj's Projected Earnings Seem Likely To Cover Future Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, the company's dividend was much higher than its earnings. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Looking forward, earnings per share is forecast to rise by 41.2% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 72% which would be quite comfortable going to take the dividend forward.

KONE Oyj Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was €1.20 in 2015, and the most recent fiscal year payment was €1.80. This implies that the company grew its distributions at a yearly rate of about 4.1% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

KONE Oyj May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. However, KONE Oyj's EPS was effectively flat over the past five years, which could stop the company from paying more every year. 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, this is probably not a great income stock, even though the dividend is being raised at the moment. Although they have been consistent in the past, we think the payments are a little high to be sustained. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for KONE Oyj that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.