Citycon Oyj (HEL:CTY1S) Is Due To Pay A Dividend Of €0.125

Citycon Oyj (HEL:CTY1S) has announced that it will pay a dividend of €0.125 per share on the 29th of December. This means the annual payment is 9.1% of the current stock price, which is above the average for the industry.

See our latest analysis for Citycon Oyj

Citycon Oyj Doesn't Earn Enough To Cover Its Payments

If the payments aren't sustainable, a high yield for a few years won't matter that much. While Citycon Oyj is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

The next 12 months is set to see EPS grow by 161.4%. Assuming the dividend continues along recent trends, we think the payout ratio could get very high, which probably can't continue without starting to put some pressure on the balance sheet.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was €0.75 in 2013, and the most recent fiscal year payment was €0.50. Doing the maths, this is a decline of about 4.0% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Citycon Oyj Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Citycon Oyj has grown earnings per share at 7.6% per year over the past five years. It's not an ideal situation that the company isn't turning a profit but the growth recently is a positive sign. All is not lost, but the future of the dividend definitely rests upon the company's ability to become profitable soon.

Our Thoughts On Citycon Oyj's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Citycon Oyj's payments, as there could be some issues with sustaining them into the future. 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 would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Citycon Oyj (of which 1 doesn't sit too well with us!) 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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