Uponor Oyj (HEL:UPONOR) Is Increasing Its Dividend To €0.34

The board of Uponor Oyj (HEL:UPONOR) has announced that it will be paying its dividend of €0.34 on the 22nd of September, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 4.9%, providing a nice boost to shareholder returns.

See our latest analysis for Uponor Oyj

Uponor Oyj's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Uponor Oyj was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

Over the next year, EPS is forecast to expand by 16.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 45%, which is in the range that makes us comfortable with the sustainability of the dividend.

Uponor Oyj Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was €0.35 in 2012, and the most recent fiscal year payment was €0.67. This means that it has been growing its distributions at 6.7% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

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 Uponor Oyj has grown earnings per share at 18% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Our Thoughts On Uponor Oyj's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. On the plus side, the dividend looks sustainable by most measures but it is let down by the lack of cash flows. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 4 Uponor Oyj analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Uponor Oyj not quite the opportunity you were looking for? Why not check out our selection of top 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.