Wulff-Yhtiöt Oyj's (HEL:WUF1V) Dividend Will Be Increased To €0.07

The board of Wulff-Yhtiöt Oyj (HEL:WUF1V) has announced that it will be increasing its dividend by 7.7% on the 20th of October to €0.07, up from last year's comparable payment of €0.065. This makes the dividend yield 4.2%, which is above the industry average.

Check out our latest analysis for Wulff-Yhtiöt Oyj

Wulff-Yhtiöt Oyj's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Wulff-Yhtiöt Oyj's dividend was only 35% of earnings, however it was paying out 223% of free cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

The next year is set to see EPS grow by 12.1%. If the dividend continues on this path, the payout ratio could be 33% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was €0.08 in 2013, and the most recent fiscal year payment was €0.14. This works out to be a compound annual growth rate (CAGR) of approximately 5.8% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that Wulff-Yhtiöt Oyj has been growing its earnings per share at 37% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Our Thoughts On Wulff-Yhtiöt Oyj's Dividend

Overall, we always like to see the dividend being raised, but we don't think Wulff-Yhtiöt Oyj will make a great income stock. While Wulff-Yhtiöt Oyj is earning enough to cover the payments, the cash flows are lacking. We don't think Wulff-Yhtiöt Oyj is a great stock to add to your portfolio if income is your focus.

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. Taking the debate a bit further, we've identified 4 warning signs for Wulff-Yhtiöt Oyj that investors need to be conscious of moving forward. Is Wulff-Yhtiöt Oyj not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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