BrasilAgro - Companhia Brasileira de Propriedades Agrícolas (BVMF:AGRO3) Will Pay A Smaller Dividend Than Last Year

BrasilAgro - Companhia Brasileira de Propriedades Agrícolas (BVMF:AGRO3) has announced that on 1st of January, it will be paying a dividend ofR$1.56, which a reduction from last year's comparable dividend. This means that the annual payment is 6.1% of the current stock price, which is lower than what the rest of the industry is paying.

See our latest analysis for BrasilAgro - Companhia Brasileira de Propriedades Agrícolas

BrasilAgro - Companhia Brasileira de Propriedades Agrícolas' Future Dividend Projections Appear Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. Based on the last dividend, BrasilAgro - Companhia Brasileira de Propriedades Agrícolas is earning enough to cover the payment, but then it makes up 137% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

EPS is set to fall by 0.1% over the next 12 months. If recent patterns in the dividend continue, we could see the payout ratio reaching 84% in the next 12 months, which is on the higher end of the range we would say is sustainable.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of R$0.101 in 2014 to the most recent total annual payment of R$1.56. This implies that the company grew its distributions at a yearly rate of about 32% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Dividend Growth May Be Hard To Come By

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 not great to see that BrasilAgro - Companhia Brasileira de Propriedades Agrícolas' earnings per share has fallen at approximately 7.1% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

The Dividend Could Prove To Be Unreliable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for BrasilAgro - Companhia Brasileira de Propriedades Agrícolas (1 is concerning!) that you should be aware of before investing. Is BrasilAgro - Companhia Brasileira de Propriedades Agrícolas not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.