Fondia Oyj (HEL:FONDIA) Is Due To Pay A Dividend Of €0.30

The board of Fondia Oyj (HEL:FONDIA) has announced that it will pay a dividend on the 1st of April, with investors receiving €0.30 per share. The dividend yield of 5.9% is still a nice boost to shareholder returns, despite the cut.

Check out our latest analysis for Fondia Oyj

Fondia Oyj's Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, the company's dividend was much higher than its earnings. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

EPS is set to grow by 186.9% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 91% which is a bit high but can definitely be sustainable.

Fondia Oyj's Dividend Has Lacked Consistency

It's comforting to see that Fondia Oyj has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2018, the dividend has gone from €0.35 total annually to €0.30. The dividend has shrunk at around 2.2% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Fondia Oyj's Dividend Might Lack Growth

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Fondia Oyj has been growing its earnings per share at 14% a year over the past five years. However, the company isn't reinvesting a lot back into the business, so we would expect the growth rate to slow down somewhat in the future.

Fondia Oyj's Dividend Doesn't Look Sustainable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for Fondia Oyj (of which 1 shouldn't be ignored!) you should know about. 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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