Nokia Oyj's (HEL:NOKIA) Dividend Will Be €0.03

The board of Nokia Oyj (HEL:NOKIA) has announced that it will pay a dividend on the 13th of February, with investors receiving €0.03 per share. This means that the annual payment will be 2.9% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Nokia Oyj

Nokia Oyj's Future Dividend Projections Appear Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before this announcement, Nokia Oyj was paying out 78% of earnings, but a comparatively small 19% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Over the next year, EPS is forecast to expand by 88.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 39%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

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 2015, the annual payment back then was €0.11, compared to the most recent full-year payment of €0.13. This implies that the company grew its distributions at a yearly rate of about 1.7% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

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 38% per annum. However, Nokia Oyj isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.

Our Thoughts On Nokia Oyj's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 Nokia Oyj that investors need to be conscious of moving forward. 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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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.