Loihde Oyj's (HEL:LOIHDE) Shareholders Will Receive A Smaller Dividend Than Last Year

Loihde Oyj (HEL:LOIHDE) has announced that on 19th of May, it will be paying a dividend of€0.75, which a reduction from last year's comparable dividend. This means that the annual payment is 1.8% of the current stock price, which is lower than what the rest of the industry is paying.

Check out our latest analysis for Loihde Oyj

Loihde Oyj's Future Dividend Projections Seem Positive

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Even though Loihde Oyj isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. This gives us some comfort about the level of the dividend payments.

Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 15%, which makes us pretty comfortable with the sustainability of the dividend.

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. Since 2022, the annual payment back then was €0.14, compared to the most recent full-year payment of €0.23. This means that it has been growing its distributions at 18% 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

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. Earnings per share has been sinking by 59% over the last 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.

The Dividend Could Prove To Be Unreliable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Loihde Oyj that investors need to be conscious of moving forward. Is Loihde Oyj not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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