Assessing the Sustainability of UPM-Kymmene Oyj's Dividend Payouts
UPM-Kymmene Oyj (UPMMY, Financial) recently announced a dividend of $0.81 per share, payable on 2024-04-30, with the ex-dividend date set for 2024-04-05. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into UPM-Kymmene Oyj's dividend performance and assess its sustainability.
What Does UPM-Kymmene Oyj Do?
UPM-Kymmene Oyj is a Finnish paper and biomaterials company. The company produces products related to the forestry industry including paper, pulp, and plywood. UPM is also a major electricity generator in Finland and is one of the global producers of self-adhesive labeling materials. It delivers responsible solutions and innovation for a future beyond fossils across six business areas: UPM Fibres, UPM Energy, UPM Raflatac, UPM Specialty Papers, UPM Communication Papers, and UPM Plywood. Geographically, the company has operational footprints in Sweden, Finland, the Netherlands, and other regions.
A Glimpse at UPM-Kymmene Oyj's Dividend History
UPM-Kymmene Oyj has maintained a consistent dividend payment record since 2020. Dividends are currently distributed on a bi-annually basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down UPM-Kymmene Oyj's Dividend Yield and Growth
As of today, UPM-Kymmene Oyj currently has a 12-month trailing dividend yield of 4.77% and a 12-month forward dividend yield of 4.78%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, UPM-Kymmene Oyj's annual dividend growth rate was 4.90%. Extended to a five-year horizon, this rate decreased to 3.90% per year. And over the past decade, UPM-Kymmene Oyj's annual dividends per share growth rate stands at an impressive 10.50%.
Based on UPM-Kymmene Oyj's dividend yield and five-year growth rate, the 5-year yield on cost of UPM-Kymmene Oyj stock as of today is approximately 5.78%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-12-31, UPM-Kymmene Oyj's dividend payout ratio is 2.05, and this may suggest that the company's dividend may not be sustainable.
UPM-Kymmene Oyj's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks UPM-Kymmene Oyj's profitability 7 out of 10 as of 2023-12-31, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. UPM-Kymmene Oyj's growth rank of 7 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and UPM-Kymmene Oyj's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. UPM-Kymmene Oyj's revenue has increased by approximately 6.80% per year on average, a rate that underperforms approximately 52.36% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, UPM-Kymmene Oyj's earnings increased by approximately -9.70% per year on average, a rate that underperforms approximately 71.21% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of -12.90%, which underperforms approximately 79.39% of global competitors.
Next Steps
In conclusion, while UPM-Kymmene Oyj's dividend history and current yield are attractive, potential investors should be cautious due to the low dividend payout ratio and mixed growth metrics. The company's profitability remains strong, but the negative earnings and EBITDA growth rates may raise concerns about the long-term sustainability of its dividend payments. Investors considering UPM-Kymmene Oyj for its dividend returns should also examine the company's strategic initiatives and industry trends to better understand its future prospects. Could UPM-Kymmene Oyj's commitment to innovation and a future beyond fossils help it overcome the challenges reflected in its growth metrics? GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener to find potential opportunities.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
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