Huhtamäki Oyj (HEL:HUH1V) Will Pay A €0.46 Dividend In Three Days

Readers hoping to buy Huhtamäki Oyj (HEL:HUH1V) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 23rd of April in order to be eligible for this dividend, which will be paid on the 3rd of May.

Huhtamäki Oyj's next dividend payment will be €0.46 per share. Last year, in total, the company distributed €0.92 to shareholders. Last year's total dividend payments show that Huhtamäki Oyj has a trailing yield of 2.3% on the current share price of €39.19. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Huhtamäki Oyj has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Huhtamäki Oyj

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Huhtamäki Oyj paid out 54% of its earnings to investors last year, a normal payout level for most businesses. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 45% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Huhtamäki Oyj's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Huhtamäki Oyj earnings per share are up 3.5% per annum over the last five years. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Huhtamäki Oyj has increased its dividend at approximately 7.7% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Is Huhtamäki Oyj worth buying for its dividend? While earnings per share growth has been modest, Huhtamäki Oyj's dividend payouts are around an average level; without a sharp change in earnings we feel that the dividend is likely somewhat sustainable. Pleasingly the company paid out a conservatively low percentage of its free cash flow. In summary, while it has some positive characteristics, we're not inclined to race out and buy Huhtamäki Oyj today.

In light of that, while Huhtamäki Oyj has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 1 warning sign for Huhtamäki Oyj that we recommend you consider before investing in the business.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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