Metso Oyj (HEL:METSO) Is About To Go Ex-Dividend, And It Pays A 4.4% Yield

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Metso Oyj (HEL:METSO) is about to trade ex-dividend in the next 4 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Metso Oyj's shares on or after the 25th of April, you won't be eligible to receive the dividend, when it is paid on the 6th of May.

The company's upcoming dividend is €0.19 a share, following on from the last 12 months, when the company distributed a total of €0.38 per share to shareholders. Based on the last year's worth of payments, Metso Oyj has a trailing yield of 4.4% on the current stock price of €8.638. If you buy this business for its dividend, you should have an idea of whether Metso Oyj's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Metso Oyj is paying out an acceptable 65% of its profit, a common payout level among most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out an unsustainably high 207% of its free cash flow as dividends over the past 12 months, which is worrying. Unless there were something in the business we're not grasping, this could signal a risk that the dividend may have to be cut in the future.

Metso Oyj paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Metso Oyj to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

See our latest analysis for Metso Oyj

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Metso Oyj's earnings per share have risen 12% per annum over the last five years. Earnings have been growing at a decent rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past five years, Metso Oyj has increased its dividend at approximately 31% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Has Metso Oyj got what it takes to maintain its dividend payments? Earnings per share growth is a positive, and the company's payout ratio looks normal. However, we note Metso Oyj paid out a much higher percentage of its free cash flow, which makes us uncomfortable. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Metso Oyj's dividend merits.

If you want to look further into Metso Oyj, it's worth knowing the risks this business faces. For example - Metso Oyj has 3 warning signs we think you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.