Alupar Investimento (BVMF:ALUP11) Is Due To Pay A Dividend Of R$0.21

The board of Alupar Investimento S.A. (BVMF:ALUP11) has announced that it will pay a dividend of R$0.21 per share on the 1st of January. Despite this raise, the dividend yield of 2.8% is only a modest boost to shareholder returns.

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Alupar Investimento's Payment Could Potentially Have Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, Alupar Investimento's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to fall by 9.9%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 52%, which is comfortable for the company to continue in the future.

See our latest analysis for Alupar Investimento

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$1.4 in 2015 to the most recent total annual payment of R$0.837. Doing the maths, this is a decline of about 5.0% per year. 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 Achieve

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Although it's important to note that Alupar Investimento's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

An additional note is that the company has been raising capital by issuing stock equal to 56% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Alupar Investimento is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Alupar Investimento that investors should know about before committing capital to this stock. 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.