HKScan Oyj's (HEL:HKSAV) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of HKScan Oyj (HEL:HKSAV) has announced that it will be increasing its dividend on the 8th of April to €0.04. Despite this raise, the dividend yield of 2.8% is only a modest boost to shareholder returns.

See our latest analysis for HKScan Oyj

HKScan Oyj's Distributions May Be Difficult To Sustain

If it is predictable over a long period, even low dividend yields can be attractive. The company is paying out a large amount of its cash flows, even though it isn't generating any profit. This makes us feel that the dividend will be hard to maintain.

Over the next year, EPS could expand by 24.6% if recent trends continue. The company seems to be going down the right path, but it will probably take a little bit longer than a year to cross over into profitability. Unless this can be done in short order, the dividend might be difficult to sustain.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The dividend has gone from €0.22 in 2012 to the most recent annual payment of €0.04. Dividend payments have fallen sharply, down 82% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

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. While the company is not yet turning a profit, it is growing at a good rate. If the company can turn a profit relatively soon, we can see this becoming a reliable income stock.

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 don't think HKScan Oyj is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for HKScan Oyj that investors should take into consideration. Is HKScan Oyj not quite the opportunity you were looking for? Why not check out our selection of top 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.