Terveystalo Oyj (HEL:TTALO) Will Pay A Dividend Of €0.14

Terveystalo Oyj's (HEL:TTALO) investors are due to receive a payment of €0.14 per share on 9th of October. The dividend yield will be 3.5% based on this payment which is still above the industry average.

See our latest analysis for Terveystalo Oyj

Terveystalo Oyj's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 347% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 37%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Analysts expect a massive rise in earnings per share in the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 47%, which would make us comfortable with the dividend's sustainability, despite the levels currently being elevated.

Terveystalo Oyj's Dividend Has Lacked Consistency

Looking back, Terveystalo Oyj's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2018, the dividend has gone from €0.06 total annually to €0.28. This implies that the company grew its distributions at a yearly rate of about 36% over that duration. 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.

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. Over the past five years, it looks as though Terveystalo Oyj's EPS has declined at around 20% a year. 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. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Terveystalo Oyj's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. 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 probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 4 warning signs for Terveystalo 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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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.