Lassila & Tikanoja Oyj's (HEL:LAT1V) Upcoming Dividend Will Be Larger Than Last Year's

Lassila & Tikanoja Oyj (HEL:LAT1V) has announced that it will be increasing its dividend from last year's comparable payment on the 7th of April to €0.50. This makes the dividend yield 5.6%, which is above the industry average.

See our latest analysis for Lassila & Tikanoja Oyj

Lassila & Tikanoja Oyj's Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate Lassila & Tikanoja Oyj's Could Struggle to Maintain Dividend Payments In The Future

Lassila & Tikanoja Oyj's Future Dividends May Potentially Be At Risk

A big dividend yield for a few years doesn't mean much if it can't be sustained. Even though Lassila & Tikanoja Oyj isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. This gives us some comfort about the level of the dividend payments.

EPS is forecast to rise very quickly over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could reach 869%, which is unsustainable.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was €0.75, compared to the most recent full-year payment of €0.50. The dividend has shrunk at around 4.0% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

Lassila & Tikanoja Oyj May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Over the past five years, it looks as though Lassila & Tikanoja Oyj's EPS has declined at around 2.8% a year. 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. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Lassila & Tikanoja Oyj's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Lassila & Tikanoja Oyj's payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

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. As an example, we've identified 1 warning sign for Lassila & Tikanoja Oyj that you should be aware of before investing. 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.