Olvi Oyj (HEL:OLVAS) Will Pay A Larger Dividend Than Last Year At €0.60

Olvi Oyj's (HEL:OLVAS) dividend will be increasing to €0.60 on 2nd of September. This makes the dividend yield 3.8%, which is above the industry average.

View our latest analysis for Olvi Oyj

Olvi Oyj Is Paying Out More Than It Is Earning

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Olvi Oyj's dividend was only 54% of earnings, however it was paying out 111% of free 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.

Over the next year, EPS is forecast to fall by 65.9%. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 172%, which is definitely a bit high to be sustainable going forward.

Olvi Oyj Has A Solid Track Record

The company has an extended history of paying stable dividends. The first annual payment during the last 10 years was €0.50 in 2012, and the most recent fiscal year payment was €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.

The Dividend Has Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Olvi Oyj has seen EPS rising for the last five years, at 5.7% per annum. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

Our Thoughts On Olvi Oyj's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Olvi Oyj's payments are rock solid. While Olvi Oyj is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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.