Olvi Oyj (HEL:OLVAS) Will Pay A Dividend Of €0.60

Olvi Oyj (HEL:OLVAS) has announced that it will pay a dividend of €0.60 per share on the 18th of April. The dividend yield will be 3.9% based on this payment which is still above the industry average.

Check out our latest analysis for Olvi Oyj

Olvi Oyj's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last dividend, Olvi Oyj is earning enough to cover the payment, but then it makes up 1,033% 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 92.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.

Olvi Oyj Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from €0.50 total annually to €1.20. This means that it has been growing its distributions at 9.1% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Unfortunately, Olvi Oyj's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Our Thoughts On Olvi Oyj's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 Olvi Oyj that investors should take into consideration. Is Olvi Oyj not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.