Stock Analysis

Kojamo Oyj's (HEL:KOJAMO) Dividend Will Be Increased To €0.39

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Kojamo Oyj's (HEL:KOJAMO) dividend will be increasing from last year's payment of the same period to €0.39 on 5th of April. Despite this raise, the dividend yield of 3.1% is only a modest boost to shareholder returns.

See our latest analysis for Kojamo Oyj

Kojamo Oyj's Earnings Easily Cover The Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. While Kojamo 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.

Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend extends its recent trend, estimates say the dividend could reach 5.5%, which we would be comfortable to see continuing.

HLSE:KOJAMO Historic Dividend February 18th 2023

Kojamo Oyj Doesn't Have A Long Payment History

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2019, the dividend has gone from €0.29 total annually to €0.39. This implies that the company grew its distributions at a yearly rate of about 7.7% over that duration. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider Kojamo Oyj to be a consistent dividend paying stock.

The Company Could Face Some Challenges Growing The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Kojamo Oyj has grown earnings per share at 15% per year over the past five years. Unprofitable companies aren't normally our pick for a dividend stock, but we like the growth that we have been seeing. If the company can become profitable soon, continuing on this trajectory would bode well for the future of the dividend.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Kojamo Oyj's payments are rock solid. 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. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. To that end, Kojamo Oyj has 2 warning signs (and 1 which is potentially serious) we think you should know about. Is Kojamo 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.