Metso Oyj (HEL:METSO) Is Due To Pay A Dividend Of €0.19

The board of Metso Oyj (HEL:METSO) has announced that it will pay a dividend on the 31st of October, with investors receiving €0.19 per share. This makes the dividend yield about the same as the industry average at 3.1%.

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Metso Oyj's Payment Could Potentially Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. At the time of the last dividend payment, Metso Oyj was paying out a very large proportion of what it was earning and 96% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

Over the next year, EPS is forecast to expand by 54.2%. If the dividend continues on this path, the payout ratio could be 56% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Metso Oyj

Metso Oyj Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The dividend has gone from an annual total of €0.10 in 2020 to the most recent total annual payment of €0.38. This means that it has been growing its distributions at 31% per annum over that time. Metso Oyj has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Metso Oyj has grown earnings per share at 13% per year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Metso Oyj will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Metso Oyj that you should be aware of before investing. 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.