CapMan Oyj's (HEL:CAPMAN) dividend will be increasing to €0.08 on 25th of March. Based on the announced payment, the dividend yield for the company will be 5.4%, which is fairly typical for the industry.
CapMan Oyj's Dividend Is Well Covered By Earnings
We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, CapMan Oyj's dividend was only 68% of earnings, however it was paying out 216% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.
Over the next year, EPS is forecast to expand by 17.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 66% by next year, which is in a pretty sustainable range.
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from €0.07 in 2012 to the most recent annual payment of €0.15. This implies that the company grew its distributions at a yearly rate of about 7.9% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.
CapMan Oyj Could Grow Its 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. We are encouraged to see that CapMan Oyj has grown earnings per share at 6.2% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think CapMan Oyj is a great stock to add to your portfolio if income is your focus.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for CapMan Oyj that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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.