Fondia Oyj (HEL:FONDIA) Is Paying Out A Larger Dividend Than Last Year

Fondia Oyj's (HEL:FONDIA) dividend will be increasing from last year's payment of the same period to €0.52 on 2nd of April. This makes the dividend yield about the same as the industry average at 4.6%.

Check out our latest analysis for Fondia Oyj

Fondia Oyj's Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. At the time of the last dividend payment, Fondia Oyj was paying out a very large proportion of what it was earning and 139% 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.

The next year is set to see EPS grow by 72.4%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 75% which would be quite comfortable going to take the dividend forward.

Fondia Oyj's Dividend Has Lacked Consistency

Fondia Oyj has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2018, the annual payment back then was €0.35, compared to the most recent full-year payment of €0.32. This works out to be a decline of approximately 1.5% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Fondia Oyj has seen earnings per share falling at 2.8% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

Fondia Oyj's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The track record isn't great, and the payments are a bit high to be considered sustainable. 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. Just as an example, we've come across 4 warning signs for Fondia Oyj you should be aware of, and 2 of them are significant. Is Fondia 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.