CapMan Oyj (HEL:CAPMAN) Has Announced That It Will Be Increasing Its Dividend To €0.08

CapMan Oyj (HEL:CAPMAN) will increase its dividend from last year's comparable payment on the 22nd of September to €0.08. The payment will take the dividend yield to 6.5%, which is in line with the average for the industry.

Check out our latest analysis for CapMan Oyj

CapMan Oyj's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, the company's dividend was much higher than its earnings. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

EPS is set to grow by 48.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 77%, which is on the higher side, but certainly still feasible.

CapMan Oyj Doesn't Have A Long Payment History

CapMan Oyj's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2014, the annual payment back then was €0.04, compared to the most recent full-year payment of €0.17. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. CapMan Oyj has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

CapMan Oyj Might Find It Hard To Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that CapMan Oyj has been growing its earnings per share at 21% a year over the past five years. While EPS is growing rapidly, CapMan Oyj paid out a very high 100% of its income as dividends. If earnings continue to grow, this dividend may be sustainable, but we think a payout this high definitely bears watching.

The Dividend Could Prove To Be Unreliable

In summary, while it's always good to see the dividend being raised, we don't think CapMan Oyj's payments are rock solid. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. To that end, CapMan Oyj has 4 warning signs (and 1 which is concerning) we think you should know about. Is CapMan Oyj not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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