Scanfil Oyj (HEL:SCANFL) Is Increasing Its Dividend To €0.19

Scanfil Oyj (HEL:SCANFL) will increase its dividend on the 2nd of May to €0.19. This takes the dividend yield from 2.7% to 2.7%, which shareholders will be pleased with.

See our latest analysis for Scanfil Oyj

Scanfil Oyj's Earnings Easily Cover the Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Scanfil Oyj was earning enough to cover the dividend, but it wasn't generating any free cash flows. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

The next year is set to see EPS grow by 17.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 40%, which is in the range that makes us comfortable with the sustainability of the dividend.

Scanfil Oyj Doesn't Have A Long Payment History

Scanfil Oyj's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2013, the first annual payment was €0.04, compared to the most recent full-year payment of €0.19. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see Scanfil Oyj has been growing its earnings per share at 215% a year over the past five years. Scanfil Oyj is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Our Thoughts On Scanfil Oyj's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Scanfil Oyj is earning enough to cover the payments, the cash flows are lacking. We don't think Scanfil Oyj is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, Scanfil Oyj has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about. Is Scanfil Oyj not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.