Huhtamäki Oyj (HEL:HUH1V) Will Pay A Larger Dividend Than Last Year At €0.50
Huhtamäki Oyj (HEL:HUH1V) has announced that it will be increasing 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 3.1%.
See our latest analysis for Huhtamäki Oyj
Huhtamäki Oyj's Dividend Is Well Covered By Earnings
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Huhtamäki Oyj was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.
Looking forward, earnings per share is forecast to rise by 31.7% over the next year. If the dividend continues on this path, the payout ratio could be 38% by next year, which we think can be pretty sustainable going forward.
Huhtamäki Oyj Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2013, the annual payment back then was €0.56, compared to the most recent full-year payment of €1.00. This means that it has been growing its distributions at 6.0% 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's Growth Prospects Are Limited
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings per share has been crawling upwards at 3.1% per year. Huhtamäki Oyj is struggling to find viable investments, so it is returning more to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.
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. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would be a touch cautious of relying on this stock primarily for the dividend income.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Huhtamäki Oyj that investors should take into consideration. 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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About HLSE:HUH1V
Huhtamäki Oyj
Provides packaging solutions in the United States, Germany, the United Kingdom, India, Turkey, Australia, Thailand, Poland, South Africa, the Czech Republic, Finland, and internationally.
Undervalued with solid track record and pays a dividend.