The board of Saga Furs Oyj (HEL:SAGCV) has announced that it will be paying its dividend of €0.66 on the 8th of May, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 6.1%, providing a nice boost to shareholder returns.
See our latest analysis for Saga Furs Oyj
Saga Furs Oyj's Dividend Is Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Saga Furs Oyj's dividend was only 47% of earnings, however it was paying out 102% of free cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.
Looking forward, earnings per share could rise by 43.2% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 30% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from €2.05 total annually to €0.66. Dividend payments have fallen sharply, down 68% 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.
The Dividend Looks Likely To Grow
Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. It's encouraging to see that Saga Furs Oyj has been growing its earnings per share at 43% a year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Saga Furs Oyj could prove to be a strong dividend payer.
In Summary
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Saga Furs Oyj is earning enough to cover the payments, the cash flows are lacking. We don't think Saga Furs Oyj is a great stock to add to your portfolio if income is your focus.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 3 warning signs for Saga Furs Oyj that investors need to be conscious of moving forward. Is Saga Furs Oyj not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
New: Manage All Your Stock Portfolios in One Place
We've created the ultimate portfolio companion for stock investors, and it's free.
• Connect an unlimited number of Portfolios and see your total in one currency
• Be alerted to new Warning Signs or Risks via email or mobile
• Track the Fair Value of your stocks
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.
About HLSE:SAGCV
Excellent balance sheet and good value.
