Metso Oyj's (HEL:METSO) Dividend Will Be Increased To €0.15

Metso Oyj's (HEL:METSO) dividend will be increasing from last year's payment of the same period to €0.15 on 6th of November. 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

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Metso Oyj's dividend was only 65% of earnings, however it was paying out 751% of free cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

The next year is set to see EPS grow by 73.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 50% by next year, which is in a pretty sustainable range.

Metso Oyj Is Still Building Its Track Record

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The dividend has gone from an annual total of €0.10 in 2020 to the most recent total annual payment of €0.30. This works out to be a compound annual growth rate (CAGR) of approximately 44% a year over that time. 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

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings have grown by 20% in the last year. Rising earnings will make it easier for the company to keep paying dividends, and possibly even increase them. Metso Oyj is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future. 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

In summary, while it's always good to see the dividend being raised, we don't think Metso Oyj's payments are rock solid. While Metso Oyj is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign 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.