Valmet Oyj (HEL:VALMT) Has Announced A Dividend Of €0.67

Valmet Oyj's (HEL:VALMT) investors are due to receive a payment of €0.67 per share on 10th of October. This takes the dividend yield to 5.8%, which shareholders will be pleased with.

Check out our latest analysis for Valmet Oyj

Valmet 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. Before making this announcement, Valmet Oyj was paying out quite a large proportion of both earnings and cash flow, with the dividend being 163% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

Looking forward, earnings per share is forecast to rise by 24.7% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 69% by next year, which is in a pretty sustainable range.

Valmet 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. Since 2014, the annual payment back then was €0.15, compared to the most recent full-year payment of €1.35. This means that it has been growing its distributions at 25% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Valmet 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. Valmet Oyj has impressed us by growing EPS at 9.9% per year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Valmet 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 probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Valmet Oyj that investors should take into consideration. 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.