Metso Outotec Oyj (HEL:MOCORP) Will Pay A Larger Dividend Than Last Year At €0.15

The board of Metso Outotec Oyj (HEL:MOCORP) has announced that it will be paying its dividend of €0.15 on the 12th of May, an increased payment from last year's comparable dividend. This takes the annual payment to 2.9% of the current stock price, which is about average for the industry.

See our latest analysis for Metso Outotec Oyj

Metso Outotec Oyj's Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, Metso Outotec Oyj's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 1,905% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

Over the next year, EPS is forecast to expand by 89.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 36%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Metso Outotec Oyj Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2021, the annual payment back then was €0.10, compared to the most recent full-year payment of €0.30. This means that it has been growing its distributions at 73% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

Metso Outotec Oyj Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Metso Outotec Oyj has grown earnings per share at 5.9% per year over the past three 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.

Metso Outotec Oyj's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments are bit high to be considered sustainable, and the track record isn't the best. This company is not in the top tier of income providing stocks.

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. For instance, we've picked out 1 warning sign for Metso Outotec Oyj that investors should take into consideration. 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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