Terveystalo Oyj (HEL:TTALO) Has Announced A Dividend Of €0.14

The board of Terveystalo Oyj (HEL:TTALO) has announced that it will pay a dividend of €0.14 per share on the 9th of October. Based on this payment, the dividend yield on the company's stock will be 4.2%, which is an attractive boost to shareholder returns.

See our latest analysis for Terveystalo Oyj

Terveystalo Oyj's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Terveystalo Oyj's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 48%, which is in a comfortable range for us.

Terveystalo Oyj's Dividend Has Lacked Consistency

Looking back, Terveystalo Oyj's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2018, the annual payment back then was €0.06, compared to the most recent full-year payment of €0.28. This means that it has been growing its distributions at 36% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Terveystalo Oyj's Dividend Might Lack Growth

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Terveystalo Oyj has grown earnings per share at 26% per year over the past five years. Although earnings per share is up nicely Terveystalo Oyj is paying out 145% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Terveystalo Oyj's payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Terveystalo Oyj is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 4 warning signs for Terveystalo Oyj that investors need to be conscious of moving forward. Is Terveystalo 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.