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It looks like Lassila & Tikanoja Oyj (HEL:LAT1V) is about to go ex-dividend in the next 4 days. If you purchase the stock on or after the 13th of March, you won't be eligible to receive this dividend, when it is paid on the 23rd of March.
Lassila & Tikanoja Oyj's next dividend payment will be €0.92 per share. Last year, in total, the company distributed €0.92 to shareholders. Last year's total dividend payments show that Lassila & Tikanoja Oyj has a trailing yield of 6.2% on the current share price of €14.88. 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.
Check out our latest analysis for Lassila & Tikanoja 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. Lassila & Tikanoja Oyj paid out 102% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year it paid out 62% of its free cash flow as dividends, within the usual range for most companies.
It's good to see that while Lassila & Tikanoja Oyj's dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.
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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Lassila & Tikanoja Oyj's earnings per share have been growing at 14% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past ten years, Lassila & Tikanoja Oyj has increased its dividend at approximately 5.3% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.