Uponor Oyj's (HEL:UPONOR) Dividend Will Be Increased To €0.34

Uponor Oyj (HEL:UPONOR) will increase its dividend from last year's comparable payment on the 22nd of September to €0.34. This will take the annual payment to 4.5% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Uponor Oyj

Uponor Oyj's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last dividend, Uponor Oyj is earning enough to cover the payment, but then it makes up 196% of 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.

Over the next year, EPS is forecast to fall by 1.2%. If the dividend continues along recent trends, we estimate the payout ratio could be 53%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Uponor Oyj Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of €0.35 in 2012 to the most recent total annual payment of €0.67. This means that it has been growing its distributions at 6.7% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

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. We are encouraged to see that Uponor Oyj has grown earnings per share at 18% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Uponor Oyj's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Uponor Oyj you should be aware of, and 1 of them is potentially serious. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.