Terveystalo Oyj (HEL:TTALO) Has Announced A Dividend Of €0.15

Terveystalo Oyj (HEL:TTALO) has announced that it will pay a dividend of €0.15 per share on the 16th of October. This makes the dividend yield 3.4%, which is above the industry average.

View our latest analysis for Terveystalo Oyj

Terveystalo 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. Even though Terveystalo Oyj isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Earnings per share is forecast to rise exponentially over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 126%, which is unsustainable.

Terveystalo Oyj's Dividend Has Lacked Consistency

Looking back, Terveystalo Oyj's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 6 years was €0.06 in 2018, and the most recent fiscal year payment was €0.30. This means that it has been growing its distributions at 31% per annum 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.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been sinking by 25% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think Terveystalo Oyj will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 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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