Suominen Oyj (HEL:SUY1V) Will Pay A Dividend Of €0.10

The board of Suominen Oyj (HEL:SUY1V) has announced that it will pay a dividend on the 15th of April, with investors receiving €0.10 per share. The dividend yield will be 3.6% based on this payment which is still above the industry average.

See our latest analysis for Suominen Oyj

Suominen Oyj's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Suominen Oyj is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

According to analysts, EPS should be several times higher next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 22%, which makes us pretty comfortable with the sustainability of the dividend.

Suominen Oyj's Dividend Has Lacked Consistency

Suominen Oyj has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 9 years was €0.05 in 2015, and the most recent fiscal year payment was €0.10. This implies that the company grew its distributions at a yearly rate of about 8.0% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Dividend Growth Potential Is Shaky

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Over the past five years, it looks as though Suominen Oyj's EPS has declined at around 30% 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.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Suominen Oyj's payments, as there could be some issues with sustaining them into the future. 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. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Suominen Oyj that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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