Sanoma Oyj (HEL:SANOMA) Has Affirmed Its Dividend Of €0.13

The board of Sanoma Oyj (HEL:SANOMA) has announced that it will pay a dividend on the 26th of April, with investors receiving €0.13 per share. This means that the annual payment will be 5.7% of the current stock price, which is in line with the average for the industry.

See our latest analysis for Sanoma Oyj

Sanoma Oyj's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, Sanoma Oyj's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 58%, which would make us comfortable with the dividend's sustainability, despite the levels currently being elevated.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from €0.10 total annually to €0.37. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. Sanoma Oyj has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Sanoma Oyj's EPS has fallen by approximately 46% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Sanoma Oyj's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Sanoma Oyj is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 4 warning signs for Sanoma Oyj (of which 1 makes us a bit uncomfortable!) you should know about. Is Sanoma 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.