Nokia Oyj (HEL:NOKIA) Will Pay A Dividend Of €0.0325

Nokia Oyj's (HEL:NOKIA) investors are due to receive a payment of €0.0325 per share on 3rd of May. This means the annual payment is 3.9% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Nokia Oyj

Nokia Oyj's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the company was paying out 109% of what it was earning. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Looking forward, earnings per share is forecast to rise by 171.7% over the next year. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 37% which brings it into quite a comfortable range.

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. Since 2014, the dividend has gone from €0.11 total annually to €0.13. This means that it has been growing its distributions at 1.7% per annum over that time. 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.

Nokia Oyj's Dividend Might Lack Growth

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Nokia Oyj has seen EPS rising for the last five years, at 52% per annum. While EPS is growing rapidly, Nokia Oyj paid out a very high 109% of its income as dividends. If earnings continue to grow, this dividend may be sustainable, but we think a payout this high definitely bears watching.

Nokia Oyj's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. Strong earnings growth means Nokia Oyj has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. This company is not in the top tier of income providing stocks.

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. To that end, Nokia Oyj has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. Is Nokia Oyj not quite the opportunity you were looking for? Why not check out 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.