Kamux Oyj (HEL:KAMUX) Is Reducing Its Dividend To €0.10

Kamux Oyj's (HEL:KAMUX) dividend is being reduced from last year's payment covering the same period to €0.10 on the 31st of October. However, the dividend yield of 2.8% still remains in a typical range for the industry.

View our latest analysis for Kamux Oyj

Kamux Oyj's Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, the company was paying out 98% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 39%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Looking forward, earnings per share is forecast to rise exponentially over the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 26% which is fairly sustainable.

Kamux Oyj's Dividend Has Lacked Consistency

It's comforting to see that Kamux Oyj has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 6 years was €0.12 in 2017, and the most recent fiscal year payment was €0.15. This means that it has been growing its distributions at 3.8% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been sinking by 13% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

The Dividend Could Prove To Be Unreliable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. 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 Kamux Oyj is a great stock to add to your portfolio if income is your focus.

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. For example, we've picked out 2 warning signs for Kamux Oyj that investors should know about before committing capital to this stock. 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.