KONE Oyj's (HEL:KNEBV) Shareholders Will Receive A Bigger Dividend Than Last Year

KONE Oyj's (HEL:KNEBV) dividend will be increasing from last year's payment of the same period to €1.80 on 14th of March. This makes the dividend yield about the same as the industry average at 3.3%.

See our latest analysis for KONE Oyj

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

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, the company's dividend was higher than its profits, and made up 86% of cash flows. The company could be more focused on returning cash to shareholders, but this could indicate that growth opportunities are few and far between.

Over the next year, EPS is forecast to expand by 41.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 72%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

KONE Oyj Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of €1.20 in 2015 to the most recent total annual payment of €1.80. This implies that the company grew its distributions at a yearly rate of about 4.1% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. 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, 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. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for KONE Oyj that investors should know about before committing capital to this stock. Is KONE Oyj not quite the opportunity you were looking for? Why not check out our selection of top 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.