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

The board of Terveystalo Oyj (HEL:TTALO) has announced that it will pay a dividend on the 16th of October, with investors receiving €0.15 per share. This makes the dividend yield 3.0%, which is above the industry average.

View our latest analysis for Terveystalo Oyj

Terveystalo Oyj Is Paying Out More Than It Is Earning

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.

EPS is forecast to rise very quickly over the next 12 months. Assuming the dividend continues along recent trends, we could see the payout ratio reach 168%, which is on the unsustainable side.

Terveystalo Oyj's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. 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. 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.

The Dividend Has Limited Growth Potential

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. Earnings per share has been sinking by 31% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. 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.

The Dividend Could Prove To Be Unreliable

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 company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Terveystalo Oyj that investors should take into consideration. 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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