UPM’s Board of Directors has revised the company’s dividend policy to be based on earnings instead of cash flow. This aligns the dividend policy with the company’s transformative growth strategy.
The new dividend policy is: “UPM aims to pay attractive dividends, targeting at least half of the comparable earnings per share over time.”
The previous dividend policy was: “UPM aims to pay attractive dividends, targeting a dividend of 30-40% of the operating cash flow per share.”
Effective capital allocation is key to attractive long-term returns, as well as developing the business portfolio in areas with the best long-term value creation potential. At UPM, capital allocation decisions take place at the corporate level. Dividends are an integral part of capital allocation. UPM plans to allocate capital to:
- Invest to grow the company and its earnings. UPM invests in sustainable businesses with strong long-term fundamentals for demand growth and a clear competitive advantage or high barrier to entry for superior returns. UPM targets growth in comparable EBIT and comparable return on equity exceeding 10%. Each business area has its own return targets.
- Pay attractive dividends. UPM aims to pay attractive dividends, targeting at least half of the comparable earnings per share over time. The targeted earnings growth drives dividend growth over time.
- Maintain a strong balance sheet. According to UPM’s leverage policy, net debt to EBITDA ratio is to be less than 2. An investment grade rating is an important element in the financing strategy.
- Share buybacks. They are a complementing tool that may be used relative to investment opportunities and company valuation.
Over the past 5 years (2018-2022), UPM allocated EUR 4.6 billion to investments. Dividends totalled EUR 3.4 billion and represented 64% of cumulative comparable profit for the respective period (2017-2021). Net debt increased by EUR 2.2 billion over the five years. The balance sheet continues to be strong, with net debt to EBITDA ratio at 0.94 at the end of 2022.
With confidence in UPM’s financial position and future earnings, UPM’s Board of Directors has proposed a dividend of EUR 1.50 (1.30) per share for 2022 to the Annual General Meeting. This represents 49% of 2022 comparable earnings per share.
UPM, Media Relations
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We deliver renewable and responsible solutions and innovate for a future beyond fossils across six business areas: UPM Fibres, UPM Energy, UPM Raflatac, UPM Specialty Papers, UPM Communication Papers and UPM Plywood. As the industry leader in responsibility, we are committed to the UN Business Ambition for 1.5°C and the science-based targets to mitigate climate change. We employ 17,200 people worldwide and our annual sales are approximately EUR 11.7 billion. Our shares are listed on Nasdaq Helsinki Ltd. UPM Biofore – Beyond fossils. www.upm.com