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

Nokia Oyj (HEL:NOKIA) will pay a dividend of €0.0325 on the 1st of August. This will take the annual payment to 3.8% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Nokia Oyj

Nokia Oyj's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before this announcement, Nokia Oyj was paying out 88% of earnings, but a comparatively small 41% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

The next year is set to see EPS grow by 113.9%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 41% which brings it into quite a comfortable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of €0.11 in 2014 to the most recent total annual payment of €0.13. This implies that the company grew its distributions at a yearly rate of about 1.7% 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.

Nokia Oyj's Dividend Might Lack Growth

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Nokia Oyj has grown earnings per share at 48% per year over the past five years. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which Nokia Oyj hasn't been doing.

Our Thoughts On Nokia Oyj's Dividend

Overall, we always like to see the dividend being raised, but we don't think Nokia 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 Nokia Oyj is a great stock to add to your portfolio if income is your focus.

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 3 warning signs for Nokia Oyj that you should be aware of before investing. Is Nokia Oyj not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.