Aspo Oyj (HEL:ASPO) Has Announced That It Will Be Increasing Its Dividend To €0.24

Aspo Oyj (HEL:ASPO) will increase its dividend from last year's comparable payment on the 23rd of April to €0.24. This will take the annual payment to 8.0% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Aspo Oyj

Aspo Oyj's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, the company was paying out 104% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 57%. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

The next year is set to see EPS grow by 95.2%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 54% which brings it into quite a comfortable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was €0.42 in 2014, and the most recent fiscal year payment was €0.47. This works out to be a compound annual growth rate (CAGR) of approximately 1.1% a year over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Aspo Oyj hasn't seen much change in its earnings per share over the last five years. The earnings growth is anaemic, and the company is paying out 104% of its profit. This gives limited room for the company to raise the dividend in the future.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Aspo Oyj (of which 1 makes us a bit uncomfortable!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.