eQ Oyj's (HEL:EQV1V) Dividend Will Be €0.33

eQ Oyj's (HEL:EQV1V) investors are due to receive a payment of €0.33 per share on 14th of October. This means that the annual payment will be 6.1% of the current stock price, which is in line with the average for the industry.

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eQ Oyj's Future Dividends May Potentially Be At Risk

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. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Over the next year, EPS is forecast to expand by 11.4%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 102% over the next year.

See our latest analysis for eQ Oyj

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the dividend has gone from €0.20 total annually to €0.66. This means that it has been growing its distributions at 13% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

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. Earnings have grown at around 3.7% a year for the past five years, which isn't massive but still better than seeing them shrink. The company is paying out a lot of its profits, even though it is growing those profits pretty slowly. As they say in finance, 'past performance is not indicative of future performance', but we are not confident a company with limited earnings growth and a high payout ratio will be a star dividend-payer over the next decade.

The Dividend Could Prove To Be Unreliable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The track record isn't great, and the payments are a bit high to be considered sustainable. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for eQ Oyj that investors need to be conscious of moving forward. Is eQ Oyj not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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