Huhtamäki Oyj (HEL:HUH1V) Has Announced That It Will Be Increasing Its Dividend To €0.50

Huhtamäki Oyj (HEL:HUH1V) will increase its dividend from last year's comparable payment on the 9th of October to €0.50. This makes the dividend yield about the same as the industry average at 3.3%.

See our latest analysis for Huhtamäki Oyj

Huhtamäki Oyj's Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. The last payment was quite easily covered by earnings, but it made up 116% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

The next year is set to see EPS grow by 14.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 38% by next year, which is in a pretty sustainable range.

Huhtamäki Oyj Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was €0.56 in 2013, and the most recent fiscal year payment was €1.00. This means that it has been growing its distributions at 6.0% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

We Could See Huhtamäki Oyj's Dividend Growing

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Huhtamäki Oyj has impressed us by growing EPS at 6.4% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Huhtamäki Oyj will make a great income stock. 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. Taking the debate a bit further, we've identified 3 warning signs for Huhtamäki Oyj that investors need to be conscious of moving forward. 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.