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

CapMan Oyj's (HEL:CAPMAN) dividend will be increasing to €0.08 on 25th of March. This takes the annual payment to 5.5% of the current stock price, which is about average for the industry.

View our latest analysis for CapMan Oyj

CapMan Oyj's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. The last payment was quite easily covered by earnings, but it made up 216% of 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.

Looking forward, earnings per share is forecast to rise by 17.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 66%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. 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. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. CapMan Oyj might have put its house in order since then, but we remain cautious.

CapMan Oyj Could Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. CapMan Oyj has impressed us by growing EPS 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.

Our Thoughts On CapMan Oyj's Dividend

In summary, while it's always good to see the dividend being raised, we don't think CapMan Oyj's payments are rock solid. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for CapMan Oyj that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.