Enauta Participações (BVMF:ENAT3) Is Paying Out Less In Dividends Than Last Year

Enauta Participações S.A. (BVMF:ENAT3) is reducing its dividend to R$0.15 on the 6th of May. This means that the dividend yield is 0.7%, which is a bit low when comparing to other companies in the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Enauta Participações' stock price has increased by 55% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Enauta Participações

Enauta Participações' Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Enauta Participações was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to fall by 58.9%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 7.9%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Enauta Participações' Dividend Has Lacked Consistency

It's comforting to see that Enauta Participações has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. There hasn't been much of a change in the dividend over the last 8. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see Enauta Participações has been growing its earnings per share at 56% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Enauta Participações Looks Like A Great Dividend Stock

Overall, we think that Enauta Participações could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Enauta Participações has 3 warning signs (and 1 which can't be ignored) we think you should know about. Is Enauta Participações not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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