Puuilo Oyj (HEL:PUUILO) Will Pay A Larger Dividend Than Last Year At €0.35

Puuilo Oyj's (HEL:PUUILO) dividend will be increasing from last year's payment of the same period to €0.35 on 2nd of June. This makes the dividend yield 3.4%, which is above the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Puuilo Oyj's stock price has increased by 36% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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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. Before making this announcement, Puuilo Oyj's was paying out quite a large proportion of earnings and 92% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.

Looking forward, earnings per share is forecast to rise by 48.9% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 69% which would be quite comfortable going to take the dividend forward.

Check out our latest analysis for Puuilo Oyj

Puuilo Oyj Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2022, the annual payment back then was €0.30, compared to the most recent full-year payment of €0.46. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. 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

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Puuilo Oyj has seen EPS rising for the last five years, at 25% per annum. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which Puuilo Oyj hasn't been doing.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Puuilo Oyj will make a great income stock. Strong earnings growth means Puuilo Oyj has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Puuilo 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.