Just Three Days Till Wärtsilä Oyj Abp (HEL:WRT1V) Will Be Trading Ex-Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Wärtsilä Oyj Abp (HEL:WRT1V) is about to go ex-dividend in just three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Wärtsilä Oyj Abp investors that purchase the stock on or after the 10th of September will not receive the dividend, which will be paid on the 18th of September.

The company's upcoming dividend is €0.16 a share, following on from the last 12 months, when the company distributed a total of €0.32 per share to shareholders. Looking at the last 12 months of distributions, Wärtsilä Oyj Abp has a trailing yield of approximately 1.7% on its current stock price of €18.575. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Wärtsilä Oyj Abp has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Wärtsilä Oyj Abp

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Wärtsilä Oyj Abp is paying out an acceptable 50% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Wärtsilä Oyj Abp generated enough free cash flow to afford its dividend. The good news is it paid out just 19% of its free cash flow in the last year.

It's positive to see that Wärtsilä Oyj Abp's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's not encouraging to see that Wärtsilä Oyj Abp's earnings are effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Wärtsilä Oyj Abp has seen its dividend decline 0.9% per annum on average over the past 10 years, which is not great to see.

Final Takeaway

Should investors buy Wärtsilä Oyj Abp for the upcoming dividend? We're not enthused by the flat earnings per share, although at least the company's payout ratio is within reasonable bounds. Additionally, it paid out a lower percentage of its free cash flow, so at least it generated more cash than it spent on dividends. In summary, it's hard to get excited about Wärtsilä Oyj Abp from a dividend perspective.

Curious what other investors think of Wärtsilä Oyj Abp? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

If you're in the market for strong dividend payers, we recommend checking 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.