Vaisala Oyj (HEL:VAIAS) Is Increasing Its Dividend To €0.72

Vaisala Oyj (HEL:VAIAS) has announced that it will be increasing its dividend from last year's comparable payment on the 12th of April to €0.72. This takes the annual payment to 1.7% of the current stock price, which is about average for the industry.

See our latest analysis for Vaisala Oyj

Vaisala Oyj's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Vaisala Oyj's dividend was only 58% of earnings, however it was paying out 162% 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.

The next year is set to see EPS grow by 59.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 38% by next year, which is in a pretty sustainable range.

Vaisala Oyj Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the annual payment back then was €0.325, compared to the most recent full-year payment of €0.72. This implies that the company grew its distributions at a yearly rate of about 8.3% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

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 that Vaisala Oyj has been growing its earnings per share at 10% a year over the past five years. 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 Vaisala Oyj's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Vaisala Oyj's payments are rock solid. While Vaisala Oyj is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 3 Vaisala Oyj analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Vaisala Oyj not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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