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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. Ex-dividend means that investors that purchase the stock on or after the 9th of April will not receive this dividend, which will be paid on the 19th of April.
Harvia Oyj’s next dividend payment will be €0.32 per share, and in the last 12 months, the company paid a total of €0.38 per share. Calculating the last year’s worth of payments shows that Harvia Oyj has a trailing yield of 1.3% on the current share price of €31. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Harvia Oyj has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Harvia Oyj
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. That’s why it’s good to see Harvia Oyj paying out a modest 47% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 28% of its free cash flow as dividends, a comfortable payout level for most companies.
It’s encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don’t drop precipitously.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Harvia Oyj’s earnings per share have been growing at 15% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination – plus the dividend can always be increased later.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, three years ago, Harvia Oyj has lifted its dividend by approximately 3.6% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Harvia Oyj is keeping back more of its profits to grow the business.
Final Takeaway
Is Harvia Oyj worth buying for its dividend? Harvia Oyj has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. There’s a lot to like about Harvia Oyj, and we would prioritise taking a closer look at it.
While it’s tempting to invest in Harvia Oyj for the dividends alone, you should always be mindful of the risks involved. Case in point: We’ve spotted 2 warning signs for Harvia Oyj you should be aware of.
If you’re in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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This article by Simply Wall St is general in nature. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
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