Uponor Oyj's (HEL:UPONOR) Upcoming Dividend Will Be Larger Than Last Year's

Uponor Oyj (HEL:UPONOR) has announced that it will be increasing its dividend from last year's comparable payment on the 20th of September to €0.35. This makes the dividend yield 4.0%, which is above the industry average.

Check out our latest analysis for Uponor Oyj

Uponor Oyj's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last dividend, Uponor Oyj is earning enough to cover the payment, but then it makes up 133% 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 expand by 14.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 53% by next year, which is in a pretty sustainable range.

Uponor Oyj Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was €0.38 in 2013, and the most recent fiscal year payment was €0.69. This means that it has been growing its distributions at 6.1% 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.

Uponor Oyj Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Uponor Oyj has seen EPS rising for the last five years, at 7.9% per annum. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

Our Thoughts On Uponor Oyj's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Uponor 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Uponor Oyj that you should be aware of before investing. 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.