Terveystalo Oyj (HEL:TTALO) Is Due To Pay A Dividend Of €0.15

The board of Terveystalo Oyj (HEL:TTALO) has announced that it will pay a dividend of €0.15 per share on the 16th of October. This takes the dividend yield to 3.0%, which shareholders will be pleased with.

Check out our latest analysis for Terveystalo Oyj

Terveystalo Oyj's Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate Terveystalo Oyj's Could Struggle to Maintain Dividend Payments In The Future

Terveystalo Oyj's Future Dividends May Potentially Be At Risk

A big dividend yield for a few years doesn't mean much if it 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. In general, cash flows are more important than the more traditional measures of profit so we feel pretty 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 168%, which is unsustainable.

Terveystalo Oyj's Dividend Has Lacked Consistency

Terveystalo Oyj has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of €0.06 in 2018 to the most recent total annual payment of €0.30. This means that it has been growing its distributions at 31% 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.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Terveystalo Oyj's EPS has declined at around 31% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into 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

In summary, while it's always good to see the dividend being raised, we don't think Terveystalo Oyj's payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Terveystalo Oyj is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.