Generous dividend proposal from Multitude's Board

Multitude announced its invitation to the Annual General Meeting, which included a dividend proposal of 0.55 EUR per share for the financial year 2025. This proposal clearly exceeded our estimate of 0.31 EUR and would indicate a dividend on the higher end of the targeted payout ratio. Although the dividend itself doesn't create value and a high dividend is somewhat questionable as the company just recently raised rather expensive capital through perpetual notes, in our view the proposal signals management's confidence in the Group's capital position and profit growth outlook. Investors greeted the proposal with a 13% stock price increase, which is a larger increase than the dividend itself. We will include the dividend proposal in our estimates in our next update and we see some upwards pressure in our dividend estimates going forward as well.

Dividend payout at the high end of the policy range

The proposed 0.55 EUR dividend corresponds to a total distribution of approximately 11.8 MEUR. Based on Multitude's 2025 Group net profit of 26.6 MEUR, the payout ratio is approximately 44%. This is at the higher end of the company’s stated dividend policy of 25–50% of net profit. We had expected the company to remain at the lower end of this range (est. 28% ratio, EUR 0.31 per share) to preserve capital for growth investments and M&A. Last year Multitude paid a EUR 0.44 dividend per share, of which EUR 0.20 was extraordinary, and thus we expected the company to lower its dividend this year.

In the case of Multitude, it's good to note that the interest on perpetual bonds is deducted from net profit (affects only EPS) and from EPS the payout ratio is approximately 51%. Multitude's bond covenants also prohibit the company from paying pay dividends higher than 50% of net profit if net equity ratio is below 25%, which was the case in 2025 (21.8%).

We think the high dividend has some positive signaling value

Overall, we find the higher-than-expected dividend payout somewhat questionable as the company just raised 70 MEUR of capital with perpetual bonds that have a high interest rate (8.9% + 3-month Euribor). Of this, 45 MEUR will go to refinancing of the previous perpetual bonds, but 25 MEUR is "new" capital. However, we think that the higher than expected dividend proposal indicates the management's trust in the profit growth outlook and also that there are no immediate risks in the loan portfolio. 

The investors rewarded the dividend proposal with a 13% (0.71 EUR per share) share price increase. The fact that the share price reaction exceeded the dividend value suggests that investors thought the proposal had a positive signaling effect regarding the company's future rather than just returning extra capital.

At the current share price, the proposed dividend offers a yield of approximately 9%. While Multitude's risk profile remains higher than traditional banks due to its focus on unsecured lending, we believe such a strong dividend signal helps to highlight the current low valuation of the stock.

We will update our estimates to reflect the proposal in our next report. We see some upward pressure on our future dividend estimates as well.