Metso Oyj's (HEL:METSO) Dividend Will Be Increased To €0.19

Metso Oyj (HEL:METSO) will increase its dividend from last year's comparable payment on the 6th of May to €0.19. The payment will take the dividend yield to 3.5%, which is in line with the average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Metso Oyj's stock price has increased by 35% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for Metso Oyj

Metso Oyj's Future Dividend Projections Appear Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. Based on the last dividend, Metso Oyj is earning enough to cover the payment, but then it makes up 218% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Looking forward, earnings per share is forecast to rise by 45.9% over the next year. If the dividend continues on this path, the payout ratio could be 54% by next year, which we think can be pretty sustainable going forward.

Metso Oyj Is Still Building Its Track Record

It is great to see that Metso Oyj has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2020, the annual payment back then was €0.10, compared to the most recent full-year payment of €0.38. This works out to be a compound annual growth rate (CAGR) of approximately 31% 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

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 12% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

In Summary

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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Metso Oyj that investors need to be conscious of moving forward. 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.