Odontoprev (BVMF:ODPV3) Has Announced A Dividend Of R$0.02

Odontoprev S.A. (BVMF:ODPV3) has announced that it will pay a dividend of R$0.02 per share on the 30th of December. Based on this payment, the dividend yield on the company's stock will be 3.8%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Odontoprev

Odontoprev's Earnings Easily Cover the Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Odontoprev was easily earning enough to 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 fall by 3.3% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 69%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2011, the first annual payment was R$0.20, compared to the most recent full-year payment of R$0.63. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Odontoprev has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Odontoprev has seen EPS rising for the last five years, at 12% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Odontoprev's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Odontoprev that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our curated list 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.