CapMan Oyj's (HEL:CAPMAN) Upcoming Dividend Will Be Larger Than Last Year's

The board of CapMan Oyj (HEL:CAPMAN) has announced that it will be increasing its dividend on the 25th of March to €0.08. The announced payment will take the dividend yield to 5.1%, which is in line with the average for the industry.

View our latest analysis for CapMan Oyj

CapMan Oyj's Earnings Easily Cover the Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. The last payment was quite easily covered by earnings, but it made up 216% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share is forecast to rise by 17.4% over the next year. If the dividend continues on this path, the payout ratio could be 66% by next year, which we think can be pretty sustainable going forward.

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. Since 2012, the first annual payment was €0.07, compared to the most recent full-year payment of €0.15. This implies that the company grew its distributions at a yearly rate of about 7.9% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. CapMan Oyj has seen EPS rising for the last five years, at 6.2% per annum. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

In Summary

Overall, we always like to see the dividend being raised, but we don't think CapMan Oyj will make a great income stock. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for CapMan Oyj that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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