Kamux Oyj (HEL:KAMUX) Has Announced That Its Dividend Will Be Reduced To €0.10

Kamux Oyj (HEL:KAMUX) is reducing its dividend from last year's comparable payment to €0.10 on the 31st of October. This means that the annual payment will be 2.8% of the current stock price, which is in line with the average for the industry.

See our latest analysis for Kamux Oyj

Kamux Oyj's Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Kamux Oyj's dividend made up quite a large proportion of earnings but only 22% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Analysts expect a massive rise in earnings per share in the next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 28%, which is in a comfortable range for us.

Kamux Oyj's Dividend Has Lacked Consistency

Kamux Oyj has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2018, the annual payment back then was €0.12, compared to the most recent full-year payment of €0.15. This means that it has been growing its distributions at 4.6% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Has Limited Growth Potential

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Kamux Oyj's EPS has fallen by approximately 12% 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. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for Kamux Oyj that investors should know about before committing capital to this stock. Is Kamux 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.