Alupar Investimento (BVMF:ALUP11) Is Increasing Its Dividend To R$1.11

Alupar Investimento S.A.'s (BVMF:ALUP11) dividend will be increasing from last year's payment of the same period to R$1.11 on 16th of June. Even though the dividend went up, the yield is still quite low at only 2.9%.

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Alupar Investimento's Projections Indicate Future Payments May Be Unsustainable

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, prior to this announcement, Alupar Investimento's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 46.4% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could reach 101%, which could put the dividend in jeopardy if the company's earnings don't improve.

Check out our latest analysis for Alupar Investimento

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. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

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. However, Alupar Investimento has only grown its earnings per share at 4.1% per annum over the past five years. If Alupar Investimento is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On Alupar Investimento's Dividend

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. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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. 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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