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 will take the dividend yield to an attractive 5.6%, providing a nice boost to shareholder returns.

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

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. While Lassila & Tikanoja Oyj is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. This gives us some comfort about the level of the dividend payments.

Earnings per share is forecast to rise exponentially over the next year. If recent patterns in the dividend continues, we would start to get a bit worried, with the payout ratio possibly reaching 869%.

View our latest analysis for Lassila & Tikanoja Oyj

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was €0.75 in 2015, and the most recent fiscal year payment was €0.50. The dividend has shrunk at around 4.0% 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.

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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's not great to see that Lassila & Tikanoja Oyj's earnings per share has fallen at approximately 2.9% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Lassila & Tikanoja Oyj that investors should know about before committing capital to this stock. Is Lassila & Tikanoja 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.