Pihlajalinna Oyj (HEL:PIHLIS) Is Paying Out A Larger Dividend Than Last Year

Pihlajalinna Oyj (HEL:PIHLIS) has announced that it will be increasing its dividend on the 26th of April to €0.30. This will take the annual payment to 2.5% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Pihlajalinna Oyj

Pihlajalinna Oyj's Earnings Easily Cover the Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, Pihlajalinna Oyj's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 10.1%. If the dividend continues on this path, the payout ratio could be 34% by next year, which we think can be pretty sustainable going forward.

Pihlajalinna Oyj's Dividend Has Lacked Consistency

It's comforting to see that Pihlajalinna Oyj has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from €0.15 in 2017 to the most recent annual payment of €0.30. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Pihlajalinna Oyj has impressed us by growing EPS at 18% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Pihlajalinna Oyj's prospects of growing its dividend payments in the future.

Pihlajalinna Oyj Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Pihlajalinna Oyj is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Pihlajalinna Oyj that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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