Kesla Oyj (HEL:KELAS) Pays A €0.10 Dividend In Just Four Days

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Kesla Oyj (HEL:KELAS) is about to trade ex-dividend in the next four days. You will need to purchase shares before the 10th of March to receive the dividend, which will be paid on the 18th of March.

Kesla Oyj's next dividend payment will be €0.10 per share. Last year, in total, the company distributed €0.10 to shareholders. Calculating the last year's worth of payments shows that Kesla Oyj has a trailing yield of 2.2% on the current share price of €4.46. If you buy this business for its dividend, you should have an idea of whether Kesla Oyj's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Kesla Oyj

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Kesla Oyj distributed an unsustainably high 111% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 11% of its free cash flow in the last year.

It's good to see that while Kesla Oyj's dividends were not covered by profits, at least they are affordable from a cash perspective. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.

Click here to see how much of its profit Kesla Oyj paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Kesla Oyj's earnings have been skyrocketing, up 39% per annum for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Kesla Oyj's dividend payments per share have declined at 10% per year on average over the past 10 years, which is uninspiring. Kesla Oyj is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

Final Takeaway

Should investors buy Kesla Oyj for the upcoming dividend? Earnings per share have been rising nicely although, even though its cashflow payout ratio is low, we question why Kesla Oyj is paying out so much of its profit. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

In light of that, while Kesla Oyj has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 4 warning signs for Kesla Oyj and you should be aware of these before buying any shares.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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