Huhtamäki Oyj (HEL:HUH1V) Is Due To Pay A Dividend Of €0.55

Huhtamäki Oyj's (HEL:HUH1V) investors are due to receive a payment of €0.55 per share on 8th of October. This makes the dividend yield about the same as the industry average at 3.5%.

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Huhtamäki Oyj's Projected Earnings Seem Likely To Cover Future Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. The last dividend was quite comfortably covered by Huhtamäki Oyj's earnings, but it was a bit tighter on the cash flow front. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

Over the next year, EPS is forecast to expand by 22.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 41% by next year, which is in a pretty sustainable range.

See our latest analysis for Huhtamäki Oyj

Huhtamäki Oyj Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the dividend has gone from €0.60 total annually to €1.10. This implies that the company grew its distributions at a yearly rate of about 6.2% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Huhtamäki Oyj May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. However, Huhtamäki Oyj has only grown its earnings per share at 4.0% per annum over the past five years. Growth of 4.0% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Huhtamäki Oyj is earning enough to cover the dividend, we are generally unimpressed with its future prospects. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Huhtamäki Oyj that investors need to be conscious of moving forward. Is Huhtamäki Oyj not quite the opportunity you were looking for? Why not check out our selection of top 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.