Harvia Oyj (HEL:HARVIA) Will Pay A Larger Dividend Than Last Year At €0.30

Harvia Oyj (HEL:HARVIA) has announced that it will be increasing its dividend from last year's comparable payment on the 25th of October to €0.30. This makes the dividend yield 5.1%, which is above the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Harvia Oyj's stock price has reduced by 48% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

Check out our latest analysis for Harvia Oyj

Harvia Oyj's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Harvia Oyj's dividend was only 34% of earnings, however it was paying out 275% of free cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Over the next year, EPS is forecast to fall by 17.6%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 50%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Harvia Oyj Is Still Building Its Track Record

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2018, the dividend has gone from €0.36 total annually to €0.79. This means that it has been growing its distributions at 22% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Harvia Oyj has been growing its earnings per share at 38% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Our Thoughts On Harvia Oyj's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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 Harvia Oyj you should be aware of, and 2 of them are a bit concerning. Is Harvia Oyj not quite the opportunity you were looking for? Why not check out our selection of top dividend 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.