Stora Enso Oyj's (HEL:STERV) Upcoming Dividend Will Be Larger Than Last Year's

Stora Enso Oyj's (HEL:STERV) dividend will be increasing from last year's payment of the same period to €0.13 on 2nd of April. Even though the dividend went up, the yield is still quite low at only 2.5%.

See our latest analysis for Stora Enso Oyj

Stora Enso Oyj's Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate Stora Enso Oyj's Could Struggle to Maintain Dividend Payments In The Future

Stora Enso Oyj's Future Dividends May Potentially Be At Risk

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Despite not generating a profit, Stora Enso Oyj 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.

Earnings per share is forecast to rise by 174.7% over the next year. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 182% over the next year.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was €0.30, compared to the most recent full-year payment of €0.25. The dividend has shrunk at around 1.8% a year during that period. 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

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Earnings per share has been sinking by 24% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

We're Not Big Fans Of Stora Enso Oyj's Dividend

In conclusion, we have some concerns about this dividend, even though it being raised is good. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.

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. Given that earnings are not growing, the dividend does not look nearly so attractive. Businesses can change though, and we think it would make sense to see what analysts are forecasting for the company. 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.