Elisa Oyj's (HEL:ELISA) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Elisa Oyj (HEL:ELISA) has announced that it will be paying its dividend of €2.15 on the 19th of April, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 3.8%.

Check out our latest analysis for Elisa Oyj

Elisa Oyj's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. At the time of the last dividend payment, Elisa Oyj was paying out a very large proportion of what it was earning and 107% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

Earnings per share is forecast to rise by 13.4% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 86% which is a bit high but can definitely be sustainable.

Elisa Oyj Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the dividend has gone from €1.30 total annually to €2.15. This means that it has been growing its distributions at 5.2% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings has been rising at 2.0% per annum over the last five years, which admittedly is a bit slow. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Just as an example, we've come across 2 warning signs for Elisa Oyj you should be aware of, and 1 of them doesn't sit too well with us. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.