Tokmanni Group Oyj (HEL:TOKMAN) Will Pay A €0.38 Dividend In Three Days

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Tokmanni Group Oyj (HEL:TOKMAN) is about to trade ex-dividend in the next three days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Tokmanni Group Oyj's shares before the 23rd of March in order to receive the dividend, which the company will pay on the 12th of April.

The company's upcoming dividend is €0.38 a share, following on from the last 12 months, when the company distributed a total of €0.76 per share to shareholders. Looking at the last 12 months of distributions, Tokmanni Group Oyj has a trailing yield of approximately 5.8% on its current stock price of €13.18. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Tokmanni Group Oyj has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Tokmanni Group Oyj

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Its dividend payout ratio is 76% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. It could become a concern if earnings started to decline. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the past year it paid out 176% of its free cash flow as dividends, which is uncomfortably high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.

Tokmanni Group Oyj paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Tokmanni Group Oyj's ability to maintain its dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Tokmanni Group Oyj's earnings per share have been growing at 17% a year for the past five years. Earnings have been growing at a decent rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Tokmanni Group Oyj has delivered an average of 11% per year annual increase in its dividend, based on the past six years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Is Tokmanni Group Oyj worth buying for its dividend? Earnings per share growth is a positive, and the company's payout ratio looks normal. However, we note Tokmanni Group Oyj paid out a much higher percentage of its free cash flow, which makes us uncomfortable. Overall, it's hard to get excited about Tokmanni Group Oyj from a dividend perspective.

If you want to look further into Tokmanni Group Oyj, it's worth knowing the risks this business faces. In terms of investment risks, we've identified 2 warning signs with Tokmanni Group Oyj and understanding them should be part of your investment process.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.