Valmet Oyj (HEL:VALMT) Has Affirmed Its Dividend Of €0.67

Valmet Oyj's (HEL:VALMT) investors are due to receive a payment of €0.67 per share on 7th of October. Based on this payment, the dividend yield on the company's stock will be 6.2%, which is an attractive boost to shareholder returns.

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Valmet Oyj's Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Valmet Oyj's dividend made up quite a large proportion of earnings but only 56% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Over the next year, EPS is forecast to expand by 67.2%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 62% which brings it into quite a comfortable range.

Check out our latest analysis for Valmet Oyj

Valmet Oyj Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of €0.25 in 2015 to the most recent total annual payment of €1.35. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Valmet Oyj May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, Valmet Oyj has only grown its earnings per share at 2.5% per annum over the past five years. Valmet Oyj's earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 7 Valmet Oyj analysts we track are forecasting continued growth with our free report on analyst estimates for the company . 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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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.