Valmet Oyj's (HEL:VALMT) Dividend Will Be €0.67

Valmet Oyj (HEL:VALMT) has announced that it will pay a dividend of €0.67 per share on the 10th of October. This will take the dividend yield to an attractive 5.2%, providing a nice boost to shareholder returns.

View our latest analysis for Valmet Oyj

Valmet Oyj's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. 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 can expose the business to needing to cut the dividend if the business runs into some challenges.

The next year is set to see EPS grow by 23.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 69%, which is in the range that makes us comfortable with the sustainability of the dividend.

Valmet 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 €0.15 in 2014 to the most recent total annual payment of €1.35. This implies that the company grew its distributions at a yearly rate of about 25% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

We Could See Valmet Oyj's Dividend Growing

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. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

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. 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. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Valmet Oyj that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com