Dividend estimates for this year promise a record dividend for Finnish listed companies. If these forecasts are even close to the truth, then in Finland investors will enjoy the largest dividends ever. Many years of improved company results have laid the foundation for this. The fall of stock prices towards the end of last year also has raised dividend yield. This means that over 40 out of about 130 main list companies of the Helsinki Stock Exchange offer more than 5% dividend yield. It’s really a lot.
What is the really reason for this? Certainly, we can find several reasons. Low general stock price level is often the cause of high dividend yields. As a frontier market Finnish shares may be moderately priced. On the other hand, we have a long bull market behind us and the valuation levels are also in Finland widely high. Other, not so positive, reason is that Finnish companies have not been able to invest so much in growth, so they have more to distribute to shareholders. This has long been a local problem.
No matter what the reason, from Finland investors can find also quality companies with high dividend yields. Or what you say about following list? (dividend yield is estimate for 2019):
Tallink Group 11.8%, Nordea 9.4%, Marimekko 8.3%, Ramirent 8.2%, Ilkka-Yhtymä 8.0%, Citycon 8.0%, CapMan 7.7%, Evli Bank 7.4%, Samp 7.2%, Raisio 7.1%, Atria 7.1%, Outokumpu 7.1%, Pohjois-Karjalan Kirjapaino 6.7%, Aktia 6.7%, eQ 6.6%, Harvia 6.5%, Saga Furs 6.3%, Tikkurila 6.3%, Lassila & Tikanoja 6.2%, DNA 6.1%, Nokisn Tyres 6.0%, Tokmanni 6.0%, Tieto 6.0%, Raute 6.0%, UPM-Kymmene 5.9%,Uponor 5.8%, Fortum 5.8%, Keskisuomalainen 5.7%, Altia 5.6%,Cramo 5.5%, Stora Enso 5.5%, Aspo 5.5% etc. (Resource: Factset, Alma Talent)
Pretty impressive list for every dividend yield hunter. Only few countries can offer same kind of numbers. And most importantly, these are not just exception for one year. Most of these companies can offer same or increasing dividends year after year.
Is it worth investing in these companies? If you are dividend income investor, surely this list is at least very interesting starting point. Dividend growth investor can find even better opportunities for companies with a liitle bit lower dividend yields – or from some other markets.
Most of the Finnish companies are smaller and less known on the international scale, which easily reduces their valuation levels. Like most of European companies, Finnish companies don’t pay normally quarter dividend. Traditionally they pay all dividend at once (mostly between February and May), which may be a negative thing for some investors. More and more companies have started to pay dividends twice a year.
Some companies to consider
The biggest Nordic bank has been an underachiever for longer. P/E ratio is 10, P/B just under 1.00 and ROE has been many years about 10% and ROA is now 0.55%. As a positive thing Nordea has increased its dividend 9 years in a row. Nordea is going through the digitalisation and efficiency prosess and moved its head office from Sweden to Finland during the 2018. But the most interesting event was when famous Nordic activist investor Christer Gardell and his company Cevian Capital announced that they had bought 2.3% of Nordea a little while ago. Gardel is famous for his ability to find undervalued companies and normally he has pushed required changes quickly.
Ramirent is a constructor equipment rental company. The strong construction market keeps the outlook for growth positive, but the cycle is expected to decline in 2019-2020. Ramirent is cyclical company, but it isn’t expensive and offer rich dividend yield. Because of company’s industry, you cannot wait for a steadily growing dividend flow. However, dividend yield is high and will probably stay that way in the near future.
Evli is a bank for investors. Its products and services include mutual funds, asset management and capital markets services. The company is not expensive, P/E is about 10, P/B 2.4, ROE is over 20% and dividend yield between 7-8%. As a long-term investment, Evli is cheaply priced, but in the short-term market risks are higher and possible decline in earnings growth causes uncertainty. The company’s high dividend yield should be fairly safe.
Nokian Tyres has been continuously the industry leader in profitability among tire manufacturers. Its operating margin has been permanently over 20%, when the biggest competitors have achieved at best low double-digit numbers. Technological advantage, broad distribution network and a strong brand provide a good starting point for faster than market growth. The great influence of the Russian market is both an opportunity and a risk for the company. After the 25% market price decline the company’s price is at an attractive level. A strong dividend is well supported by profits and cash flows.
Tieto is an information technology service company providing IT and product engineering services. Tieto has increased its dividend for eight years in a row – and this year will be the ninth. At the same time, the dividend yield has been consistently about 5%. The company has a very profitable software business. Its strategy reform and the large structural rearrangement are behind. In IT service business competition is tough and increasingly all the time, but for an investor chasing stable growing dividend, Tieto can be a good option.
UPM-Kymmene is a global forest-based bioindustry company. The company operates across six business areas. After a sharp share price decline late last year, the stock is no longer unreasonably expensive. UPM’s competitive position is very strong because of recent exceptionally favorable operating environment. The challenge is long-term modest outlook for forest business. Revenue and earnings growth may be difficult to achieve. Because of strong cash flow and balance sheet dividend is safe and the company offers every spring fat pay packet for those looking for dividend income.
Aspo is a Finland-based conglomerate engaged in four different business segments. Aspo’s earnings growth prospects for the next few years are good. Especially Telko and ESL (with their new LNG-fueled cargo ships) business segments have very good possibilities to improve their results. Aspo’s risk profile has decreased in recent years clearly, but broad Russian business operations are still both political and financial risk. The stock is not a bargain, but not particularly expensive. As an investor you got a strong and pretty safe dividend yield and opportunity for interesting and productive mergers and acquisitions.