Nokia Oyj (HEL:NOKIA) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

It looks like Nokia Oyj (HEL:NOKIA) is about to go ex-dividend in the next 4 days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Nokia Oyj's shares before the 2nd of May in order to receive the dividend, which the company will pay on the 12th of May.

The company's upcoming dividend is €0.035 a share, following on from the last 12 months, when the company distributed a total of €0.14 per share to shareholders. Looking at the last 12 months of distributions, Nokia Oyj has a trailing yield of approximately 3.2% on its current stock price of €4.382. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

We've discovered 1 warning sign about Nokia Oyj. View them for free.

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Nokia Oyj is paying out an acceptable 64% of its profit, a common payout level among most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 40% of its free cash flow in the past year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

View our latest analysis for Nokia Oyj

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Nokia Oyj's earnings have been skyrocketing, up 145% per annum for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Nokia Oyj could have strong prospects for future increases to the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Nokia Oyj has delivered an average of 2.4% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

To Sum It Up

Has Nokia Oyj got what it takes to maintain its dividend payments? Nokia Oyj's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. Nokia Oyj looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while Nokia Oyj looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 1 warning sign with Nokia Oyj and understanding them should be part of your investment process.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.