Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Terveystalo Oyj (HEL:TTALO) has started paying a dividend to shareholders. It currently trades on a yield of 2.3%. Should it have a place in your portfolio? Let’s take a look at Terveystalo Oyj in more detail.
5 checks you should use to assess 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?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has dividend per share risen in the past couple of years?
- Can it afford to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Terveystalo Oyj pass our checks?
Terveystalo Oyj has a trailing twelve-month payout ratio of 37%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect TTALO’s payout to increase to 55% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 3.3%. However, EPS is forecasted to fall to €0.41 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Unfortunately, it is really too early to view Terveystalo Oyj as a dividend investment. Last year was the company’s first dividend payment, so it is certainly early days. The standard practice for reliable payers is to look for 10 or so years of track record.
Relative to peers, Terveystalo Oyj has a yield of 2.3%, which is high for Healthcare stocks but still below the low risk savings rate.
After digging a little deeper into Terveystalo Oyj’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three relevant factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for TTALO’s future growth? Take a look at our free research report of analyst consensus for TTALO’s outlook.
- Valuation: What is TTALO 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 TTALO is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.