Loihde Oyj (HEL:LOIHDE) Will Pay A Dividend Of €1.00

The board of Loihde Oyj (HEL:LOIHDE) has announced that it will pay a dividend of €1.00 per share on the 17th of May. This will take the annual payment to 7.4% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Loihde Oyj

Loihde Oyj Is Paying Out More Than It Is Earning

If the payments aren't sustainable, a high yield for a few years won't matter that much. Loihde Oyj isn't generating any profits, and it is paying out a very high proportion of the cash it is earning. These payout levels would generally be quite difficult to keep up.

Over the next year, EPS is forecast to grow rapidly. If recent patterns in the dividend continues, we would start to get a bit worried, with the payout ratio possibly reaching 1,209%.

Loihde Oyj's Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. The dividend has gone from an annual total of €0.14 in 2022 to the most recent total annual payment of €1.00. This means that it has been growing its distributions at 167% per annum over that time. Loihde Oyj has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Has Limited Growth Potential

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. Loihde Oyj's earnings per share has shrunk at 106% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

We're Not Big Fans Of Loihde Oyj's Dividend

Overall, while the dividend being raised can be good, there are some concerns about its long term sustainability. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, this doesn't get us very excited from an income standpoint.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Loihde Oyj (1 is a bit concerning!) 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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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.