Huhtamäki Oyj (HEL:HUH1V) Has Announced That It Will Be Increasing Its Dividend To €0.53

Huhtamäki Oyj (HEL:HUH1V) will increase its dividend on the 7th of May to €0.53, which is 6.0% higher than last year's payment from the same period of €0.50. The payment will take the dividend yield to 2.6%, which is in line with the average for the industry.

Check out our latest analysis for Huhtamäki Oyj

Huhtamäki Oyj's Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. The last dividend was quite easily covered by Huhtamäki Oyj's earnings. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 72.5%. 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 dividend has gone from an annual total of €0.56 in 2014 to the most recent total annual payment of €1.00. This works out to be a compound annual growth rate (CAGR) of approximately 6.0% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Huhtamäki Oyj hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On Huhtamäki Oyj's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Huhtamäki 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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