Adecoagro (NYSE:AGRO) Is Increasing Its Dividend To $0.174

Adecoagro S.A. (NYSE:AGRO) has announced that it will be increasing its periodic dividend on the 27th of November to $0.174, which will be 5.5% higher than last year's comparable payment amount of $0.165. Based on this payment, the dividend yield for the company will be 2.8%, which is fairly typical for the industry.

See our latest analysis for Adecoagro

Adecoagro's Payment Could Potentially Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, Adecoagro's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 49.9% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 34%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Adecoagro Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The dividend has gone from an annual total of $0.317 in 2021 to the most recent total annual payment of $0.327. This means that it has been growing its distributions at 1.0% per annum over that time. Adecoagro hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Adecoagro has grown earnings per share at 66% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Adecoagro Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Adecoagro has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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