Verkkokauppa.com Oyj (HEL:VERK) Has Re-Affirmed Its Dividend Of €0.058

The board of Verkkokauppa.com Oyj (HEL:VERK) has announced that it will pay a dividend on the 27th of July, with investors receiving €0.058 per share. Based on this payment, the dividend yield on the company's stock will be 5.3%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Verkkokauppa.com Oyj

Verkkokauppa.com Oyj Doesn't Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Verkkokauppa.com Oyj's dividend was only 63% of earnings, however it was paying out 268% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Earnings per share is forecast to rise by 14.4% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 118%, which is a bit high and could start applying pressure to the balance sheet.

Verkkokauppa.com Oyj's Dividend Has Lacked Consistency

It's comforting to see that Verkkokauppa.com Oyj has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2015, the dividend has gone from €0.14 to €0.45. This means that it has been growing its distributions at 21% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Verkkokauppa.com Oyj has seen EPS rising for the last five years, at 13% per annum. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

Our Thoughts On Verkkokauppa.com Oyj's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Verkkokauppa.com Oyj's payments, as there could be some issues with sustaining them into the future. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Verkkokauppa.com Oyj (1 is concerning!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

If you’re looking to trade a wide range of investments, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.