Valmet Oyj (HEL:VALMT) Pays A €0.67 Dividend In Just Three Days
Valmet Oyj (HEL:VALMT) stock is about to trade ex-dividend in three days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Therefore, if you purchase Valmet Oyj's shares on or after the 30th of September, you won't be eligible to receive the dividend, when it is paid on the 7th of October.
The company's next dividend payment will be €0.67 per share, on the back of last year when the company paid a total of €1.35 to shareholders. Calculating the last year's worth of payments shows that Valmet Oyj has a trailing yield of 4.8% on the current share price of €28.26. If you buy this business for its dividend, you should have an idea of whether Valmet Oyj's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. It paid out 83% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be concerned if earnings began to decline. A useful secondary check can be to evaluate whether Valmet Oyj generated enough free cash flow to afford its dividend. It paid out 81% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.
It's positive to see that Valmet Oyj's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Check out our latest analysis for Valmet Oyj
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's not encouraging to see that Valmet Oyj's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. A high payout ratio of 83% generally happens when a company can't find better uses for the cash. Combined with slim earnings growth in the past few years, Valmet Oyj could be signalling that its future growth prospects are thin.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Valmet Oyj has lifted its dividend by approximately 14% a year on average.
Final Takeaway
Is Valmet Oyj worth buying for its dividend? Earnings per share have barely grown, and although Valmet Oyj paid out over half its earnings and free cash flow last year, the payout ratios are within a normal range for most companies. Overall, it's hard to get excited about Valmet Oyj from a dividend perspective.
With that being said, if dividends aren't your biggest concern with Valmet Oyj, you should know about the other risks facing this business. For example - Valmet Oyj has 1 warning sign we think you should be aware of.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.