Reka Industrial Oyj (HEL:REKA) Is Increasing Its Dividend To €0.09

Reka Industrial Oyj (HEL:REKA) will increase its dividend on the 20th of April to €0.09. This takes the dividend yield from 2.4% to 2.4%, which shareholders will be pleased with.

View our latest analysis for Reka Industrial Oyj

Reka Industrial Oyj's Earnings Easily Cover the Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Reka Industrial Oyj was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 56.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 36%, which is in the range that makes us comfortable with the sustainability of the dividend.

Reka Industrial Oyj's Dividend Has Lacked Consistency

Reka Industrial Oyj has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from €0.04 in 2017 to the most recent annual payment of €0.09. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Reka Industrial Oyj's earnings per share has shrunk at 21% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Reka Industrial Oyj's payments are rock solid. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

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. Case in point: We've spotted 3 warning signs for Reka Industrial Oyj (of which 1 can't be ignored!) you should know about. Is Reka Industrial Oyj not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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