Alantra Partners (BME:ALNT) Is Paying Out Less In Dividends Than Last Year

Alantra Partners, S.A. (BME:ALNT) is reducing its dividend from last year's comparable payment to €0.0648 on the 10th of May. The dividend yield of 9.4% is still a nice boost to shareholder returns, despite the cut.

View our latest analysis for Alantra Partners

Alantra Partners' Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Alantra Partners was paying out a fairly large proportion of earnings, and it wasn't generating positive free cash flows either. We think that this practice can make the dividend quite risky in the future.

Unless the company can turn things around, EPS could fall by 5.2% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 12%, which is an improvement from where it is currently.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from €0.70 total annually to €0.82. This means that it has been growing its distributions at 1.6% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Dividend Growth Is Doubtful

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though Alantra Partners' EPS has declined at around 5.2% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

The Dividend Could Prove To Be Unreliable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The payments are bit high to be considered sustainable, and the track record isn't the best. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 4 warning signs for Alantra Partners that investors should know about before committing capital to this stock. Is Alantra Partners not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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