TietoEVRY Oyj (HEL:TIETO) Is Due To Pay A Dividend Of €0.75

The board of TietoEVRY Oyj (HEL:TIETO) has announced that it will pay a dividend on the 2nd of October, with investors receiving €0.75 per share. This will take the annual payment to 9.4% of the stock price, which is above what most companies in the industry pay.

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TietoEVRY Oyj's Projections Indicate Future Payments May Be Unsustainable

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

TietoEVRY Oyj's Future Dividends May Potentially Be At Risk

If the payments aren't sustainable, a high yield for a few years won't matter that much. TietoEVRY Oyj is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

EPS is forecast to rise very quickly over the next 12 months. If recent patterns in the dividend continues, we would start to get a bit worried, with the payout ratio possibly reaching 121%.

Check out our latest analysis for TietoEVRY Oyj

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of €1.00 in 2015 to the most recent total annual payment of €1.50. This implies that the company grew its distributions at a yearly rate of about 4.1% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth Is Doubtful

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's not great to see that TietoEVRY Oyj's earnings per share has fallen at approximately 8.3% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

TietoEVRY Oyj's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think TietoEVRY Oyj's payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for TietoEVRY Oyj that investors need to be conscious of moving forward. Is TietoEVRY Oyj not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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