Tokmanni Group Oyj (HEL:TOKMAN) Is Paying Out Less In Dividends Than Last Year

Tokmanni Group Oyj (HEL:TOKMAN) is reducing its dividend from last year's comparable payment to €0.38 on the 12th of April. This means the annual payment is 5.5% of the current stock price, which is above the average for the industry.

View our latest analysis for Tokmanni Group Oyj

Tokmanni Group Oyj's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Tokmanni Group Oyj was paying out quite a large proportion of both earnings and cash flow, with the dividend being 140% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

Over the next year, EPS is forecast to expand by 36.6%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 32% which would be quite comfortable going to take the dividend forward.

Tokmanni Group Oyj's Dividend Has Lacked Consistency

Tokmanni Group Oyj has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2017, the dividend has gone from €0.41 total annually to €0.76. This means that it has been growing its distributions at 11% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Dividend Growth Could Be Constrained

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Tokmanni Group Oyj has been growing its earnings per share at 17% a year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

Tokmanni Group Oyj's Dividend Doesn't Look Sustainable

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. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Tokmanni Group Oyj that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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