Huhtamäki Oyj (HEL:HUH1V) Is Increasing Its Dividend To €0.50

The board of Huhtamäki Oyj (HEL:HUH1V) has announced that the dividend on 9th of May will be increased to €0.50, which will be 6.4% higher than last year's payment of €0.47 which covered the same period. This takes the annual payment to 2.9% of the current stock price, which is about average for the industry.

View our latest analysis for Huhtamäki Oyj

Huhtamäki Oyj's Earnings Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, Huhtamäki Oyj was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS is forecast to expand by 6.4%. If the dividend continues on this path, the payout ratio could be 36% by next year, which we think can be pretty sustainable going forward.

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. Since 2013, the annual payment back then was €0.46, compared to the most recent full-year payment of €0.94. This means that it has been growing its distributions at 7.4% per annum 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 Has Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Huhtamäki Oyj has seen EPS rising for the last five years, at 8.0% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase 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. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Huhtamäki Oyj you should be aware of, and 1 of them is concerning. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.