Why You Might Be Interested In Nokia Oyj (HEL:NOKIA) For Its Upcoming Dividend

Nokia Oyj (HEL:NOKIA) stock is about to trade ex-dividend in two days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Nokia Oyj's shares before the 22nd of July in order to receive the dividend, which the company will pay on the 1st of August.

The company's next dividend payment will be €0.03 per share. Last year, in total, the company distributed €0.13 to shareholders. Looking at the last 12 months of distributions, Nokia Oyj has a trailing yield of approximately 3.8% on its current stock price of €3.40. If you buy this business for its dividend, you should have an idea of whether Nokia Oyj's dividend is reliable and sustainable. As a result, readers should always check whether Nokia Oyj has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Nokia Oyj

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Its dividend payout ratio is 88% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be worried about the risk of a drop in earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 38% 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.

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. It's encouraging to see Nokia Oyj has grown its earnings rapidly, up 48% a year for the past five years. Earnings per share are growing at a rapid rate, yet the company is paying out more than three-quarters of its earnings.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Nokia Oyj has lifted its dividend by approximately 1.7% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Nokia Oyj is keeping back more of its profits to grow the business.

Final Takeaway

Is Nokia Oyj an attractive dividend stock, or better left on the shelf? We like Nokia Oyj's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. There's a lot to like about Nokia Oyj, and we would prioritise taking a closer look at it.

In light of that, while Nokia Oyj has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 3 warning signs for Nokia Oyj you should be aware of.

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.

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