TietoEVRY Oyj's (HEL:TIETO) Dividend Will Be €0.75

TietoEVRY Oyj (HEL:TIETO) has announced that it will pay a dividend of €0.75 per share on the 2nd of October. This takes the dividend yield to 9.2%, which shareholders will be pleased with.

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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. Even though TietoEVRY Oyj isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. 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.

Over the next year, EPS is forecast to grow rapidly. If the dividend continues along recent trends, we estimate the payout ratio could reach 131%, which is unsustainable.

View 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. Since 2015, the annual payment back then was €1.00, compared to the most recent full-year payment of €1.50. This implies that the company grew its distributions at a yearly rate of about 4.1% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Dividend Growth Is Doubtful

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. TietoEVRY Oyj has seen earnings per share falling at 8.3% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. 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 company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think TietoEVRY Oyj is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for TietoEVRY Oyj that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.