Huhtamäki Oyj (HEL:HUH1V) Has Announced That It Will Be Increasing Its Dividend To €0.94

Huhtamäki Oyj (HEL:HUH1V) has announced that it will be increasing its dividend on the 6th of May to €0.94. This takes the dividend yield from 2.5% to 3.8%, which shareholders will be pleased with.

See our latest analysis for Huhtamäki Oyj

Huhtamäki 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. Based on the last dividend, Huhtamäki Oyj is earning enough to cover the payment, but the it makes up 118% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Over the next year, EPS is forecast to expand by 34.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 67%, which is in the range that makes us comfortable with the sustainability of the dividend.

Huhtamäki Oyj Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the dividend has gone from €0.46 to €0.94. This works out to be a compound annual growth rate (CAGR) of approximately 7.4% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Although it's important to note that Huhtamäki Oyj's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

Our Thoughts On Huhtamäki Oyj's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Huhtamäki Oyj's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Huhtamäki 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. 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 Huhtamäki Oyj that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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