Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Historically, Olvi Oyj (HEL:OLVAS) has been paying a dividend to shareholders. Today it yields 2.7%. Does Olvi Oyj tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
5 questions I ask before picking a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it the top 25% annual dividend yield payer?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share amount increased over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
How well does Olvi Oyj fit our criteria?
Olvi Oyj has a trailing twelve-month payout ratio of 45.4%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 48.7%, leading to a dividend yield of 3.0%. In addition to this, EPS should increase to €1.88.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
In terms of its peers, Olvi Oyj produces a yield of 2.7%, which is on the low-side for Beverage stocks.
Keeping in mind the dividend characteristics above, Olvi Oyj is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three fundamental factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for OLVAS’s future growth? Take a look at our free research report of analyst consensus for OLVAS’s outlook.
- Valuation: What is OLVAS worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether OLVAS is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.