Metso Oyj (HEL:METSO) Will Pay A Dividend Of €0.19

Metso Oyj (HEL:METSO) has announced that it will pay a dividend of €0.19 per share on the 31st of October. The payment will take the dividend yield to 3.3%, which is in line with the average for the industry.

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Metso Oyj's Payment Could Potentially Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. 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 52.5%. 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.

View our latest analysis for Metso Oyj

Metso Oyj Doesn't Have A Long Payment History

Metso Oyj's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The dividend has gone from an annual total of €0.10 in 2020 to the most recent total annual payment of €0.38. This implies that the company grew its distributions at a yearly rate of about 31% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Metso Oyj has been growing its earnings per share at 13% a year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

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. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Metso Oyj that investors need to be conscious of moving forward. Is Metso Oyj not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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