There's A Lot To Like About Neste Oyj's (HEL:NESTE) Upcoming €0.41 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 Neste Oyj (HEL:NESTE) is about to go ex-dividend in just four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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. In other words, investors can purchase Neste Oyj's shares before the 31st of March in order to be eligible for the dividend, which will be paid on the 8th of April.

The company's upcoming dividend is €0.41 a share, following on from the last 12 months, when the company distributed a total of €0.82 per share to shareholders. Looking at the last 12 months of distributions, Neste Oyj has a trailing yield of approximately 2.3% on its current stock price of €36.2. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Neste Oyj has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Neste Oyj

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Neste Oyj paid out a comfortable 36% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year it paid out 60% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Neste Oyj'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?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Neste Oyj's earnings per share have risen 14% per annum over the last five years. Neste Oyj has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Neste Oyj has increased its dividend at approximately 22% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

From a dividend perspective, should investors buy or avoid Neste Oyj? Earnings per share have grown at a nice rate in recent times and over the last year, Neste Oyj paid out less than half its earnings and a bit over half its free cash flow. Neste Oyj looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while Neste Oyj looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Case in point: We've spotted 1 warning sign for Neste Oyj you should be aware of.

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.