Wärtsilä Oyj Abp (HEL:WRT1V) Is Paying Out A Larger Dividend Than Last Year

The board of Wärtsilä Oyj Abp (HEL:WRT1V) has announced that it will be paying its dividend of €0.13 on the 20th of March, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 2.7%.

View our latest analysis for Wärtsilä Oyj Abp

Wärtsilä Oyj Abp Is Paying Out More Than It Is Earning

We aren't too impressed by dividend yields unless they can be sustained over time. Even though Wärtsilä Oyj Abp is not generating a profit, it is still paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

Over the next year, EPS is forecast to grow rapidly. If recent patterns in the dividend continues, we would start to get a bit worried, with the payout ratio possibly reaching 198%.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was €0.333 in 2013, and the most recent fiscal year payment was €0.26. This works out to be a decline of approximately 2.5% per year 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been sinking by 40% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. 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.

Wärtsilä Oyj Abp's Dividend Doesn't Look Great

In summary, investors will like to be receiving a higher dividend, but we have some questions about whether it can be sustained over the long term. 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 Wärtsilä Oyj Abp that investors should take into consideration. 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.