Readers hoping to buy Patria Investments Limited (NASDAQ:PAX) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company’s books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company’s books on the record date. Therefore, if you purchase Patria Investments’ shares on or after the 28th of February, you won’t be eligible to receive the dividend, when it is paid on the 22nd of March.
The company’s next dividend payment will be US$0.31 per share, and in the last 12 months, the company paid a total of US$0.70 per share. Calculating the last year’s worth of payments shows that Patria Investments has a trailing yield of 4.3% on the current share price of $16.23. If you buy this business for its dividend, you should have an idea of whether Patria Investments’s dividend is reliable and sustainable. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Check out our latest analysis for Patria Investments
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Patria Investments distributed an unsustainably high 111% of its profit as dividends to shareholders last year. Without extenuating circumstances, we’d consider the dividend at risk of a cut.
When the dividend payout ratio is high, as it is in this case, the dividend is usually at greater risk of being cut in the future.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we’re glad to see Patria Investments’s earnings per share have risen 11% per annum over the last five years.
Patria Investments also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus – perpetually pushing a boulder uphill.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Patria Investments has delivered 29% dividend growth per year on average over the past two years. It’s exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
The Bottom Line
From a dividend perspective, should investors buy or avoid Patria Investments? It’s been growing earnings per share at a pleasant rate, although its dividend payout was not well covered by earnings. It doesn’t appear an outstanding opportunity, but could be worth a closer look.
With that being said, if dividends aren’t your biggest concern with Patria Investments, you should know about the other risks facing this business. Our analysis shows 3 warning signs for Patria Investments that we strongly recommend you have a look at before investing in the company.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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