Terveystalo Oyj (HEL:TTALO) Is Due To Pay 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 will take the dividend yield to an attractive 3.8%, providing a nice boost to shareholder returns.

View our latest analysis for Terveystalo Oyj

Terveystalo Oyj's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Terveystalo Oyj is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. This gives us some comfort about the level of the dividend payments.

Over the next year, EPS is forecast to expand rapidly. If the dividend continues along recent trends, we believe we could see the payout ratio reaching 81%, which is definitely on the higher side, but still sustainable.

Terveystalo Oyj's Dividend Has Lacked Consistency

It's comforting to see that Terveystalo Oyj has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of €0.06 in 2018 to the most recent total annual payment of €0.30. This implies that the company grew its distributions at a yearly rate of about 31% over that duration. 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 evaluate if earnings per share is growing, which could point to a growing dividend in the future. Terveystalo Oyj's earnings per share has shrunk at 19% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Terveystalo Oyj's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Terveystalo Oyj will make a great income stock. 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 would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 2 warning signs for Terveystalo Oyj that you should be aware of before investing. 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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