If you are an income investor, then Nokian Renkaat Oyj (HEL:NRE1V) should be on your radar. Nokian Renkaat Oyj develops and manufactures tires in Finland, Sweden, Norway, Russia and the CIS, rest of Europe, North America, and internationally. Over the past 10 years, the €3.8b market cap company has been growing its dividend payments, from €0.50 to €1.56. Currently yielding 5.6%, let’s take a closer look at Nokian Renkaat Oyj’s dividend profile.
What Is A Dividend Rock Star?
It is a stock that pays a stable and consistent dividend, having done so reliably for the past decade with the expectation of this continuing into the future. More specifically:
- Its annual yield is among the top 25% of dividend payers
- It has paid dividend every year without dramatically reducing payout in the past
- Its has increased its dividend per share amount over the past
- It is able to pay the current rate of dividends from its earnings
- It has the ability to keep paying its dividends going forward
High Yield And Dependable
Nokian Renkaat Oyj’s yield sits at 5.6%, which is high for Auto Components stocks. But the real reason Nokian Renkaat Oyj stands out is because it has a high chance of being able to continue to pay dividend at this level for years to come, something that is quite desirable if you are looking to create a portfolio that generates a steady stream of income.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. NRE1V has increased its DPS from €0.50 to €1.56 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. These are all positive signs of a great, reliable dividend stock.
Nokian Renkaat Oyj has a trailing twelve-month payout ratio of 73%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect NRE1V’s payout to remain around the same level at 73% of its earnings. Assuming a constant share price, this equates to a dividend yield of 5.9%. Moreover, EPS should increase to €2.15.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
Investors of Nokian Renkaat Oyj can continue to expect strong dividends from the stock. With its favorable dividend characteristics, if high income generation is still the goal for your portfolio, then Nokian Renkaat Oyj is one worth keeping around. However, given this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three important aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for NRE1V’s future growth? Take a look at our free research report of analyst consensus for NRE1V’s outlook.
- Valuation: What is NRE1V worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether NRE1V is currently mispriced by the market.
- Other Dividend Rockstars: Are there strong dividend payers with better fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.