HKScan Oyj (HEL:HKSAV) Is Increasing Its Dividend To €0.04

HKScan Oyj (HEL:HKSAV) will increase its dividend on the 8th of April to €0.04. Although the dividend is now higher, the yield is only 2.8%, which is below the industry average.

Check out our latest analysis for HKScan Oyj

HKScan Oyj's Distributions May Be Difficult To Sustain

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. HKScan Oyj isn't generating any profits, and it is paying out a very high proportion of the cash it is earning. This makes us feel that the dividend will be hard to maintain.

Looking forward, earnings per share could rise by 24.6% over the next year if the trend from the last few years continues. This is the right direction to be moving, but it is probably not enough to achieve profitability. Unless this happens fairly soon, the dividend could start to come under pressure.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. Since 2012, the dividend has gone from €0.22 to €0.04. Dividend payments have fallen sharply, down 82% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Company Could Face Some Challenges Growing The Dividend

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. HKScan Oyj has seen EPS rising for the last five years, at 25% per annum. Even though the company is not profitable, it is growing at a solid clip. If profitability can be achieved soon and growth continues apace, this stock could certainly turn into a solid dividend payer.

HKScan Oyj's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think HKScan Oyj will make a great income stock. Strong earnings growth means HKScan Oyj has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. As an example, we've identified 1 warning sign for HKScan Oyj that you should be aware of before investing. 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.