There's A Lot To Like About F-Secure Oyj's (HEL:FSECURE) Upcoming €0.02 Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see F-Secure Oyj (HEL:FSECURE) is about to trade ex-dividend in the next four days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase F-Secure Oyj's shares on or after the 29th of September, you won't be eligible to receive the dividend, when it is paid on the 7th of October.
The company's next dividend payment will be €0.02 per share. Last year, in total, the company distributed €0.04 to shareholders. Looking at the last 12 months of distributions, F-Secure Oyj has a trailing yield of approximately 2.1% on its current stock price of €1.926. 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 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 F-Secure Oyj paying out a modest 37% of its earnings. 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. Thankfully its dividend payments took up just 32% of the free cash flow it generated, which is a comfortable payout ratio.
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.
View our latest analysis for F-Secure Oyj
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. This is why it's a relief to see F-Secure Oyj earnings per share are up 5.9% per annum over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. F-Secure Oyj has seen its dividend decline 17% per annum on average over the past three years, which is not great to see. F-Secure Oyj is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
To Sum It Up
Should investors buy F-Secure Oyj for the upcoming dividend? Earnings per share growth has been growing somewhat, and F-Secure Oyj is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but F-Secure Oyj is being conservative with its dividend payouts and could still perform reasonably over the long run. Overall we think this is an attractive combination and worthy of further research.
On that note, you'll want to research what risks F-Secure Oyj is facing. In terms of investment risks, we've identified 1 warning sign with F-Secure Oyj and understanding them should be part of your investment process.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.