Terveystalo Oyj (HEL:TTALO) Will Pay A Dividend Of €0.15

Terveystalo Oyj's (HEL:TTALO) investors are due to receive a payment of €0.15 per share on 16th of October. This will take the dividend yield to an attractive 4.0%, providing a nice boost to shareholder returns.

See our latest analysis for Terveystalo Oyj

Terveystalo Oyj Is Paying Out More Than It Is Earning

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Even though Terveystalo Oyj isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. This gives us some comfort about the level of the dividend payments.

Over the next year, EPS is forecast to grow rapidly. If the dividend continues along recent trends, we estimate the payout ratio could reach 98%, 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. This suggests that the dividend might not be the most reliable. The annual payment during the last 6 years was €0.06 in 2018, and the most recent fiscal year payment was €0.30. This implies that the company grew its distributions at a yearly rate of about 31% over that duration. Terveystalo Oyj has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Terveystalo Oyj's earnings per share has shrunk at 19% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. 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 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 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.