Fortum Oyj's (HEL:FORTUM) Dividend Will Be €0.57

Fortum Oyj's (HEL:FORTUM) investors are due to receive a payment of €0.57 per share on 9th of October. This will take the annual payment to 8.3% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Fortum Oyj

Fortum Oyj Doesn't Earn Enough To Cover Its Payments

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Fortum Oyj's was paying out quite a large proportion of earnings and 86% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.

EPS is set to fall by 44.0% over the next 12 months. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 127%, which is definitely a bit high to be sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was €1.10, compared to the most recent full-year payment of €1.15. Dividend payments have been growing, but very slowly over the period. 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.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Fortum Oyj has been growing its earnings per share at 12% a year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

Our Thoughts On Fortum Oyj's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Fortum Oyj is earning enough to cover the dividend, we are generally unimpressed with its future prospects. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Fortum Oyj (1 makes us a bit uncomfortable!) that you should be aware of before investing. 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.