Wärtsilä Oyj Abp (HEL:WRT1V) Will Pay A Dividend Of €0.16

The board of Wärtsilä Oyj Abp (HEL:WRT1V) has announced that it will pay a dividend on the 18th of September, with investors receiving €0.16 per share. Despite this raise, the dividend yield of 1.7% is only a modest boost to shareholder returns.

Check out our latest analysis for Wärtsilä Oyj Abp

Wärtsilä Oyj Abp's Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. The last dividend was quite easily covered by Wärtsilä Oyj Abp's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 73.3% over the next year. If the dividend continues on this path, the payout ratio could be 28% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of €0.35 in 2014 to the most recent total annual payment of €0.32. Dividend payments have shrunk at a rate of less than 1% per annum over this time frame. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, Wärtsilä Oyj Abp's EPS was effectively flat over the past five years, which could stop the company from paying more every year. Growth of 0.2% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This could mean the dividend doesn't have the growth potential we look for going into the future.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 16 analysts we track are forecasting for Wärtsilä Oyj Abp for free with public analyst estimates for the company. Is Wärtsilä Oyj Abp 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.