Odontoprev (BVMF:ODPV3) Has Affirmed Its Dividend Of R$0.0336

Odontoprev S.A. (BVMF:ODPV3) will pay a dividend of R$0.0336 on the 29th of January. This means the annual payment is 8.0% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Odontoprev

Odontoprev Is Paying Out More Than It Is Earning

If the payments aren't sustainable, a high yield for a few years won't matter that much. At the time of the last dividend payment, Odontoprev was paying out a very large proportion of what it was earning and 204% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

The next 12 months is set to see EPS grow by 4.8%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 111% over the next year.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was R$0.354, compared to the most recent full-year payment of R$0.9. This implies that the company grew its distributions at a yearly rate of about 9.8% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Odontoprev's Dividend Might Lack Growth

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 that Odontoprev has been growing its earnings per share at 13% a year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

Odontoprev's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. Strong earnings growth means Odontoprev has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We don't think Odontoprev is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Odontoprev has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.

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