Alupar Investimento (BVMF:ALUP11) Is Increasing Its Dividend To R$0.87

Alupar Investimento S.A. (BVMF:ALUP11) will increase its dividend from last year's comparable payment on the 16th of June to R$0.87. This takes the annual payment to 3.1% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Alupar Investimento

Alupar Investimento's Projected Earnings Seem Likely To Cover Future Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Alupar Investimento was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 25.3%. If the dividend continues along recent trends, we estimate the payout ratio could be 62%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of R$1.46 in 2015 to the most recent total annual payment of R$0.87. Doing the maths, this is a decline of about 5.0% per year. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth May Be Hard To Achieve

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. However, Alupar Investimento has only grown its earnings per share at 4.1% per annum over the past five years. While EPS growth is quite low, Alupar Investimento has the option to increase the payout ratio to return more cash to shareholders.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. To that end, Alupar Investimento has 3 warning signs (and 2 which shouldn't be ignored) we think you should know about. Is Alupar Investimento 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.