TietoEVRY Oyj (HEL:TIETO) Is Paying Out A Larger Dividend Than Last Year

TietoEVRY Oyj (HEL:TIETO) has announced that it will be increasing its dividend from last year's comparable payment on the 3rd of April to €0.75. This takes the dividend yield to 8.3%, which shareholders will be pleased with.

See our latest analysis for TietoEVRY Oyj

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

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Even though TietoEVRY Oyj isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Earnings per share is forecast to rise exponentially over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 244%, which is unsustainable.

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. The dividend has gone from an annual total of €0.90 in 2015 to the most recent total annual payment of €1.50. This means that it has been growing its distributions at 5.2% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. TietoEVRY Oyj might have put its house in order since then, but we remain cautious.

The Dividend's Growth Prospects Are Limited

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. However, TietoEVRY Oyj's EPS was effectively flat over the past five years, which could stop the company from paying more every year. With EPS growth hard to come by and the company not turning a profit, we wouldn't be particularly optimistic about the growth prospects for TietoEVRY Oyj's dividend in the future.

Our Thoughts On TietoEVRY Oyj's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for TietoEVRY Oyj that you should be aware of before investing. 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.