There is a lot to be liked about Nokian Renkaat Oyj (HEL:NRE1V) as an income stock. It has paid dividends over the past 10 years. The company currently pays out a dividend yield of 5.9% to shareholders, making it a relatively attractive dividend stock. Does Nokian Renkaat Oyj tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
5 questions I ask before picking a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has the amount of dividend per share grown over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will it have the ability to keep paying its dividends going forward?
Does Nokian Renkaat Oyj pass our checks?
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 6.1%. In addition to this, EPS should increase to €2.16.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. In the case of NRE1V it has increased its DPS from €0.50 to €1.56 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes NRE1V a true dividend rockstar.
In terms of its peers, Nokian Renkaat Oyj generates a yield of 5.9%, which is high for Auto Components stocks.
Considering the dividend attributes we analyzed above, Nokian Renkaat Oyj is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three fundamental factors you should further research:
- 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 better dividend payers with stronger 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.