BrasilAgro - Companhia Brasileira de Propriedades Agrícolas' (BVMF:AGRO3) Shareholders Will Receive 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$0.7529, which a reduction from last year's comparable dividend. Based on this payment, the dividend yield will be 3.7%, which is lower than the average for the industry.

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BrasilAgro - Companhia Brasileira de Propriedades Agrícolas' Payment Could Potentially Have Solid Earnings Coverage

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 126% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Over the next year, EPS is forecast to expand by 73.2%. If the dividend continues on this path, the payout ratio could be 37% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for BrasilAgro - Companhia Brasileira de Propriedades Agrícolas

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 annual payment during the last 10 years was R$1.39 in 2015, and the most recent fiscal year payment was R$0.75. This works out to be a decline of approximately 6.0% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth May Be Hard To Come By

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. BrasilAgro - Companhia Brasileira de Propriedades Agrícolas has seen earnings per share falling at 8.1% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

BrasilAgro - Companhia Brasileira de Propriedades Agrícolas' Dividend Doesn't Look Sustainable

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. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think BrasilAgro - Companhia Brasileira de Propriedades Agrícolas is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 3 warning signs for BrasilAgro - Companhia Brasileira de Propriedades Agrícolas that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.