Fortum Oyj's Dividend Analysis
Assessing the Sustainability and Performance of Fortum Oyj's Dividends
Fortum Oyj (FOJCY) recently announced a dividend of $0.13 per share, payable on a date yet to be announced, with the ex-dividend date set for 2024-03-26. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Fortum Oyj's dividend performance and assess its sustainability.
What Does Fortum Oyj Do?
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Fortum Oyj is a Finnish energy company that operates power plants, which use renewable energy sources (hydro, nuclear, and solar power) to sell electricity, heat, cooling, and power products and services. The company mainly operates in Nordic and Baltic countries, Russia, Poland, and India. Its main divisions of the company are generation (large-scale power production), city solutions (sustainable energy solutions), Russia (all Russian operations), technology and new ventures (research and development and in-house incubator for startups), mergers and acquisitions, and solar and wind development. The company's operating segments are Generation, Consumer Solutions, and Other Operations.
A Glimpse at Fortum Oyj's Dividend History
Fortum Oyj has maintained a consistent dividend payment record since 2009. Dividends are currently distributed on a bi-annually basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Fortum Oyj's Dividend Yield and Growth
As of today, Fortum Oyj currently has a 12-month trailing dividend yield of 7.67% and a 12-month forward dividend yield of 12.58%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, Fortum Oyj's annual dividend growth rate was -6.10%. Extended to a five-year horizon, this rate increased to -2.30% per year. And over the past decade, Fortum Oyj's annual dividends per share growth rate stands at -0.30%.
Based on Fortum Oyj's dividend yield and five-year growth rate, the 5-year yield on cost of Fortum Oyj stock as of today is approximately 6.83%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-12-31, Fortum Oyj's dividend payout ratio is 0.56.
Fortum Oyj's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Fortum Oyj's profitability 7 out of 10 as of 2023-12-31, suggesting good profitability prospects. The company has reported net profit in 8 years out of past 10 years.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Fortum Oyj's growth rank of 7 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Fortum Oyj's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Fortum Oyj's revenue has increased by approximately -48.60% per year on average, a rate that underperforms than approximately 97.01% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Fortum Oyj's earnings increased by approximately -21.30% per year on average, a rate that underperforms than approximately 79.49% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 13.60%, which underperforms than approximately 38.61% of global competitors.
Looking Ahead: Fortum Oyj's Dividend Prospects
When considering Fortum Oyj's recent dividend announcement and historical performance, investors should weigh the company's payout ratio, profitability, and growth metrics. Despite some challenges in growth rates, the company's consistent dividend history and moderate payout ratio may provide some reassurance to income-focused investors. However, the negative growth rates in dividends per share and earnings signal caution. The future sustainability of Fortum Oyj's dividends will largely depend on its ability to reverse these trends and leverage its strong profitability to generate positive earnings and revenue growth.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
