TietoEVRY Oyj (HEL:TIETO) Will Pay A Dividend Of €0.735

The board of TietoEVRY Oyj (HEL:TIETO) has announced that it will pay a dividend of €0.735 per share on the 3rd of October. This will take the dividend yield to an attractive 7.9%, providing a nice boost to shareholder returns.

View our latest analysis for TietoEVRY Oyj

TietoEVRY Oyj's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, the dividend made up 88% of cash flows, but a higher proportion of net income. While the cash payout ratio isn't necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.

Earnings per share is forecast to rise by 34.2% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 82% which is a bit high but can definitely be sustainable.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from €0.90 total annually to €1.47. This implies that the company grew its distributions at a yearly rate of about 5.0% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Dividend Growth May Be Hard To Achieve

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. TietoEVRY Oyj has seen earnings per share falling at 2.0% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. 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.

TietoEVRY Oyj's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think TietoEVRY Oyj will make a great income stock. The payments are bit high to be considered sustainable, and the track record isn't the best. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. 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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