Agrícola Nacional S.A.C. é I. (SNSE:ANASAC) Vies For A Place In Your Dividend Portfolio: Here's Why

Could Agrícola Nacional S.A.C. é I. (SNSE:ANASAC) be an attractive dividend share to own for the long haul? Investors are often drawn to strong companies with the idea of reinvesting the dividends. If you are hoping to live on your dividends, it's important to be more stringent with your investments than the average punter. Regular readers know we like to apply the same approach to each dividend stock, and we hope you'll find our analysis useful.

A high yield and a long history of paying dividends is an appealing combination for Agrícola NacionalC. é I. It would not be a surprise to discover that many investors buy it for the dividends. Some simple research can reduce the risk of buying Agrícola NacionalC. é I for its dividend - read on to learn more.

Explore this interactive chart for our latest analysis on Agrícola NacionalC. é I!

Payout ratios

Dividends are usually paid out of company earnings. If a company is paying more than it earns, then the dividend might become unsustainable - hardly an ideal situation. As a result, we should always investigate whether a company can afford its dividend, measured as a percentage of a company's net income after tax. Looking at the data, we can see that 11% of Agrícola NacionalC. é I's profits were paid out as dividends in the last 12 months. We like this low payout ratio, because it implies the dividend is well covered and leaves ample opportunity for reinvestment.

In addition to comparing dividends against profits, we should inspect whether the company generated enough cash to pay its dividend. Agrícola NacionalC. é I paid out 6.2% of its free cash flow as dividends last year, which is conservative and suggests the dividend is sustainable. It's positive to see that Agrícola NacionalC. é I's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

We update our data on Agrícola NacionalC. é I every 24 hours, so you can always get our latest analysis of its financial health, here.

Dividend Volatility

From the perspective of an income investor who wants to earn dividends for many years, there is not much point buying a stock if its dividend is regularly cut or is not reliable. Agrícola NacionalC. é I has been paying dividends for a long time, but for the purpose of this analysis, we only examine the past 10 years of payments. Its dividend payments have declined on at least one occasion over the past 10 years. During the past 10-year period, the first annual payment was CL$158 in 2011, compared to CL$74.4 last year. The dividend has shrunk at around 7.3% a year during that period. Agrícola NacionalC. é I's dividend has been cut sharply at least once, so it hasn't fallen by 7.3% every year, but this is a decent approximation of the long term change.

When a company's per-share dividend falls we question if this reflects poorly on either external business conditions, or the company's capital allocation decisions. Either way, we find it hard to get excited about a company with a declining dividend.

Dividend Growth Potential

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS are growing. Earnings have grown at around 8.4% a year for the past five years, which is better than seeing them shrink! A low payout ratio and strong historical earnings growth suggests Agrícola NacionalC. é I has been effectively reinvesting in its business. We think this generally bodes well for its dividend prospects.

Conclusion

When we look at a dividend stock, we need to form a judgement on whether the dividend will grow, if the company is able to maintain it in a wide range of economic circumstances, and if the dividend payout is sustainable. Firstly, we like that Agrícola NacionalC. é I has low and conservative payout ratios. Next, earnings growth has been good, but unfortunately the dividend has been cut at least once in the past. All things considered, Agrícola NacionalC. é I looks like a strong prospect. At the right valuation, it could be something special.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 3 warning signs for Agrícola NacionalC. é I that investors should know about before committing capital to this stock.

If you are a dividend investor, you might also want to look at our curated list of dividend stocks yielding above 3%.

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This article by Simply Wall St is general in nature. 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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