Fiagros are good dividend payers, but there are risks. Look

  • Currently, the IFIX, an index that measures the performance of FIIs – including Fiagros –, operates close to stability in the accumulated result for the year. Ibovespa, on the other hand, drops more than 4% so far
  • As they are mostly agricultural credit assets, the profitability of Fiagros is indexed to CDI or IPCA. Because of this, in a scenario of high interest rates and inflation, they are able to benefit from
  • Even paying double-digit dividends, investors need to consider the risks of investing in a segment that is still developing.

Who invests or intends to invest in fiagrothe Agroindustrial Production Chains Investment Funds, saw last week a strong devaluation happen in one of the assets managed and administered by the BTG Pactual . On Wednesday (22) and Thursday (23), BTG Pactual Terras Agrícolas (BRTA11) fell 19.59% in the two trading sessions. But the devaluation of the BRTA11 need not worry Fiagro investors so much: it is just a one-off movement of the asset, and not a negative tide in Real Estate Funds (FIIs) of agro, explain experts heard by the E-Investor.

Through a material fact, BTG communicated to the market that Fazenda Vianmancel, which represents a share of about 23% of BRTA11, has filed for judicial reorganization. The FII in question buys the properties from the land operators themselves, who pay rent to use them, as is the case of the farm, which is located in the municipality of Nova Maringá (MT), a region known for having a high level of productivity of soybeans and corn per hectare.

The announcement took the market by surprise, not only because of the legal issue, but because of the possibility of falling monthly rents received by BRTA11 until BTG managed to resolve the issue with the tenant. For Felipe Paletta, partner and analyst at Monett, the fall of almost 20% in the price of the asset is an exaggerated reaction on the part of the market, “Today this farm basically represents 23% of the fund’s monthly income in terms of rent, but the fund basically dropped that same percentage. It has an exaggerated movement, because investors consider the worst case scenario, which would be a definitive equity loss”, he explains.

Paletta says that BTG has ways to resolve the issue and that this should not affect BRTA11 in the long term, nor harm the scenario for agro FIIs. Currently, the IFIX, an index that measures the performance of investments real estate companies – including Fiagros – operate close to stability in the year. A somewhat positive result compared to the drop of more than 4% of the Ibovespa so far.

“This movement of real estate funds holding back in the face of a fall in the Ibovespa is curious. The movement coincides with the interest rate movement itself, which FIIs follow very closely in terms of performance”, says the Monett analyst.

As they are mostly agricultural credit assets, the profitability of Fiagros is indexed to the CDI or the IPCA (Extended Consumer Price Index). Because of this, in a scenario of high interest rates and inflation, they are able to benefit. “Because of the indexation, they are able to pass on this monetary correction in the contracts almost immediately. This has favored dividends for the Fiagros”, highlights Caio Araújo, an analyst at Empiricus.

Attractiveness for dividends

Since the first Fiagros options were launched, the assets have attracted more and more investors because of the remuneration of dividends. In addition to having the same advantages as FIIs, such as exemption from Income Tax (IR) on income for individuals, this asset class is linked to the agribusiness sector, which is very strong in the country and considered resistant to market volatility.

“It’s a great way to monetize the portfolio of customers who need monthly income, because Fiagros pay the resource to the customer’s account in an exempt way and still have a higher profitability than the average products of the FIIs, since they are, for the most part, , post-fixed plus a spread”, explains Jansen Costa, founding partner of Fatorial Investimentos.

A survey carried out by Vectis Gestão with the 14 Fiagros available on B3 shows that most paid double-digit dividends in May 2022. As many funds are still in the capitalization phase, the manager’s survey follows not only the dividend yield ( index that measures the profitability of dividends) in the year, but also the annualization of the last dividend paid to avoid distortions in the analysis of the accumulated value since January.

The partner and head of credit at Vectis, Mucio Mattos, points out that, in addition to the good profitability offered, investment in agro FIIs can be a good alternative because of the diversification and exposure to a sector that represents almost 30% of the Gross Domestic Product ( GDP) of the Brazilian economy. “Despite the volatility in the stock market, the agro sector tends to be more defensive and less volatile than other segments of the economy. It is a sector that is very exposed to the global economy and has a good part of its revenue in dollars and can even benefit from a less stable local environment”, he says.

When choosing which asset to invest in, it is necessary to look beyond the remuneration of earnings: “It is important for investors to analyze the management team behind the product and their ability to select the best opportunities within such a vast sector. A relatively diversified portfolio is desirable, both in terms of sectors within agribusiness and regionally, in order to mitigate impacts inherent to the sector, such as weather or commodity prices”, points out Mattos.

Despite being a good alternative to compose the investor’s portfolio, Fiagros should not represent a very large portion of the portfolio, advise experts. It is a segment still in consolidation and, therefore, risky.

“For the investor, it is necessary to be careful in terms of the size of exposure to this industry, which is still very new and may suffer from problems like this in BTRA11. It is a relatively riskier sector than the more consolidated segments in the FIIs industry, but, on the other hand, the tendency is for us to see above-average results in the long term”, says Felipe Paletta, from Monett.

At Empiricus, agro FIIs are treated as alternative investments and not the main asset of the portfolio. Caio Araújo, an analyst at the house, explains that the remuneration of Fiagros comes with a high level of risk, which investors need to be aware of.

“This involves the debtor’s ability to pay, the guarantees, the transparency that the management is delivering when explaining to the investor how that operation works, in addition to which agricultural segment it is in. The agricultural market is cyclical, there are times when it is good to invest in grains, there are times when it is not. Keeping that in mind is important”, guides Araújo.