Puuilo Oyj (HEL:PUUILO) Has Announced A Dividend Of €0.19

The board of Puuilo Oyj (HEL:PUUILO) has announced that it will pay a dividend on the 24th of October, with investors receiving €0.19 per share. This takes the dividend yield to 3.9%, which shareholders will be pleased with.

Check out our latest analysis for Puuilo Oyj

Puuilo Oyj's Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last payment made up 76% of earnings, but cash flows were much higher. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

The next year is set to see EPS grow by 54.6%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 53% which brings it into quite a comfortable range.

Puuilo Oyj Is Still Building Its Track Record

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 2022, the dividend has gone from €0.30 total annually to €0.38. This means that it has been growing its distributions at 13% per annum over that time. Puuilo Oyj has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Dividend Growth Could Be Constrained

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Puuilo Oyj has been growing its earnings per share at 22% a year over the past five years. However, Puuilo Oyj isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.

Our Thoughts On Puuilo Oyj's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Puuilo Oyj that investors need to be conscious of moving forward. 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.