Olvi Oyj (HEL:OLVAS) Is Increasing Its Dividend To €0.60

Olvi Oyj's (HEL:OLVAS) dividend will be increasing from last year's payment of the same period to €0.60 on 2nd of September. This will take the annual payment to 3.3% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Olvi Oyj

Olvi Oyj's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite comfortably covered by Olvi Oyj's earnings, but it was a bit tighter on the cash flow front. The business is earning enough to make the dividend feasible, but the cash payout ratio of 91% indicates it is more focused on returning cash to shareholders than growing the business.

Looking forward, earnings per share is forecast to fall by 5.7% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 63%, which is comfortable for the company to continue in the future.

Olvi Oyj Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of €0.50 in 2012 to the most recent total annual payment of €1.20. This means that it has been growing its distributions at 9.1% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. Earnings has been rising at 4.3% per annum over the last five years, which admittedly is a bit slow. Olvi Oyj is struggling to find viable investments, so it is returning more to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Olvi Oyj's payments are rock solid. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Olvi Oyj has been making. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Olvi Oyj that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.