Puuilo Oyj's (HEL:PUUILO) Dividend Will Be Increased To €0.35

The board of Puuilo Oyj (HEL:PUUILO) has announced that it will be paying its dividend of €0.35 on the 2nd of June, an increased payment from last year's comparable dividend. This takes the dividend yield to 3.8%, which shareholders will be pleased with.

We've discovered 1 warning sign about Puuilo Oyj. View them for free.

Puuilo Oyj's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Puuilo Oyj's was paying out quite a large proportion of earnings and 92% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.

The next year is set to see EPS grow by 48.5%. 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

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2022, the dividend has gone from €0.30 total annually to €0.46. This means that it has been growing its distributions at 15% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

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 impressed us by growing EPS at 25% per year over the past five years. 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

In summary, while it's always good to see the dividend being raised, we don't think Puuilo Oyj's payments are rock solid. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We don't think Puuilo Oyj is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Puuilo Oyj that investors should take into consideration. Is Puuilo 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.