Metso Oyj (HEL:METSO) Is Increasing Its Dividend To €0.15

Metso Oyj (HEL:METSO) will increase its dividend from last year's comparable payment on the 6th of November to €0.15. This takes the annual payment to 2.8% of the current stock price, which is about average for the industry.

Check out our latest analysis for Metso Oyj

Metso Oyj's Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last dividend, Metso Oyj is earning enough to cover the payment, but then it makes up 751% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Looking forward, earnings per share is forecast to rise by 73.7% over the next year. If the dividend continues on this path, the payout ratio could be 50% by next year, which we think can be pretty sustainable going forward.

Metso Oyj Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. Since 2020, the dividend has gone from €0.10 total annually to €0.30. This means that it has been growing its distributions at 44% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. EPS has grown 20% over the last 12 months. We always like to see growing earnings, and if the trend continues it would be a very positive sign for the dividend potential. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have. However, we would never make any decisions based on only a single year of data, especially when assessing long term dividend potential.

Our Thoughts On Metso Oyj's Dividend

Overall, we always like to see the dividend being raised, but we don't think Metso Oyj will make a great income stock. While Metso Oyj is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Metso Oyj that investors should know about before committing capital to this stock. 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.