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Over the past 10 years Fortum Oyj (HEL:FORTUM) has grown its dividend payouts from €1 to €1.1. With a market cap of €18b, Fortum Oyj pays out 82% of its earnings, leading to a 5.3% yield. Let me elaborate on you why the stock stands out for income investors like myself.
View our latest analysis for Fortum Oyj
What Is A Dividend Rock Star?
It is a stock that pays a consistent, reliable and competitive dividend over a long period of time, and is expected to continue to pay in the same manner many years to come. More specifically:
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Its annual yield is among the top 25% of dividend payers
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It has paid dividend every year without dramatically reducing payout in the past
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Its dividend per share amount has increased over the past
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It can afford to pay the current rate of dividends from its earnings
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It is able to continue to payout at the current rate in the future
High Yield And Dependable
Fortum Oyj currently yields 5.3%, which is high for Electric Utilities stocks. But the real reason Fortum Oyj stands out is because it has a proven track record of continuously paying out this level of dividends, from earnings, to shareholders and can be expected to continue paying in the future. This is a highly desirable trait for a stock holding if you're investor who wants a robust cash inflow from your portfolio over a long period of time.
If there is one thing that you want to be reliable in your life, it's dividend stocks and their constant income stream. FORTUM has increased its DPS from €1 to €1.1 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 FORTUM a true dividend rockstar.
The current trailing twelve-month payout ratio for the stock is 82%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect FORTUM's payout to fall to 67% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 5.4%. However, EPS should increase to €1.46, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
Next Steps:
With Fortum Oyj producing strong dividend income for your portfolio over the past few years, you can take comfort in knowing that this stock will still continue to be a top dividend generator moving forward. However, given this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three fundamental aspects you should further examine: