Ultrapar Participações' (BVMF:UGPA3) Dividend Is Being Reduced To R$0.10

Ultrapar Participações S.A. (BVMF:UGPA3) is reducing its dividend from last year's comparable payment to R$0.10 on the 3rd of March. This means that the dividend yield is 3.8%, which is a bit low when comparing to other companies in the industry.

Check out our latest analysis for Ultrapar Participações

Ultrapar Participações' Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. However, Ultrapar Participações' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 6.6% over the next year. If the dividend continues on this path, the payout ratio could be 27% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the annual payment back then was R$0.51, compared to the most recent full-year payment of R$0.514. Its dividends have grown at less than 1% per annum over this time frame. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Unfortunately, Ultrapar Participações' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 4 warning signs for Ultrapar Participações (2 shouldn't be ignored!) that you should be aware of before investing. Is Ultrapar Participações not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.