Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Harvia Oyj (HEL:HARVIA) is about to go ex-dividend in just 3 days. Investors can purchase shares before the 3rd of April in order to be eligible for this dividend, which will be paid on the 15th of April.
Harvia Oyj's upcoming dividend is €0.19 a share, following on from the last 12 months, when the company distributed a total of €0.38 per share to shareholders. Based on the last year's worth of payments, Harvia Oyj has a trailing yield of 4.6% on the current stock price of €8.28. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Harvia Oyj paid out 74% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out more than half (52%) of its free cash flow in the past year, which is within an average range for most companies.
It's positive to see that Harvia 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.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Harvia Oyj, with earnings per share up 4.9% on average over the last five years. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last two years, Harvia Oyj has lifted its dividend by approximately 2.7% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Has Harvia Oyj got what it takes to maintain its dividend payments? Earnings per share growth has been unremarkable, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don't appear excessive. To summarise, Harvia Oyj looks okay on this analysis, although it doesn't appear a stand-out opportunity.
So if you want to do more digging on Harvia Oyj, you'll find it worthwhile knowing the risks that this stock faces. Case in point: We've spotted 4 warning signs for Harvia Oyj you should be aware of.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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