Metsä Board Oyj (HEL:METSB) Is Increasing Its Dividend To €0.58

The board of Metsä Board Oyj (HEL:METSB) has announced that it will be paying its dividend of €0.58 on the 5th of April, an increased payment from last year's comparable dividend. This takes the dividend yield to 7.2%, which shareholders will be pleased with.

Check out our latest analysis for Metsä Board Oyj

Metsä Board Oyj's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last payment was quite easily covered by earnings, but it made up 875% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Over the next year, EPS is forecast to fall by 16.3%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 61%, which is comfortable for the company to continue in the future.

Metsä Board Oyj Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of €0.06 in 2013 to the most recent total annual payment of €0.58. This works out to be a compound annual growth rate (CAGR) of approximately 25% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Metsä Board Oyj has been growing its earnings per share at 25% a year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Metsä Board Oyj could prove to be a strong dividend payer.

Our Thoughts On Metsä Board Oyj's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Metsä Board Oyj's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Metsä Board Oyj (of which 1 is a bit unpleasant!) you should know about. 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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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.