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

Olvi Oyj (HEL:OLVAS) has announced that it will be increasing its dividend from last year's comparable payment on the 2nd of September to €0.60. This makes the dividend yield 3.2%, which is above the industry average.

Check out our latest analysis for Olvi Oyj

Olvi Oyj's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last dividend, Olvi Oyj is earning enough to cover the payment, but then it makes up 111% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

EPS is set to fall by 6.5% over the next 12 months. 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 an extended history of paying stable dividends. 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. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Has Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Olvi Oyj has been growing its earnings per share at 5.7% a year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

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. While Olvi Oyj is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Olvi Oyj (of which 1 shouldn't be ignored!) you should know about. Is Olvi 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.