SLC Agrícola's (BVMF:SLCE3) Dividend Is Being Reduced To R$0.5469

SLC Agrícola S.A. (BVMF:SLCE3) is reducing its dividend from last year's comparable payment to R$0.5469 on the 15th of May. Based on this payment, the dividend yield will be 4.4%, which is lower than the average for the industry.

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SLC Agrícola's Future Dividend Projections Appear Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, SLC Agrícola's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

The next year is set to see EPS grow by 92.0%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 31% which brings it into quite a comfortable range.

See our latest analysis for SLC Agrícola

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of R$0.0802 in 2015 to the most recent total annual payment of R$0.884. This means that it has been growing its distributions at 27% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth Could Be Constrained

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that SLC Agrícola has been growing its earnings per share at 11% a year over the past five years. While EPS is growing at a decent rate, but future growth could be limited by the amount of earnings being paid out to shareholders.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for SLC Agrícola (of which 1 is a bit unpleasant!) you should know about. Is SLC Agrícola 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.