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It Might Not Be A Great Idea To Buy Patria Investments Limited (NASDAQ:PAX) For Its Next Dividend

Patria Investments Limited (NASDAQ:PAX) stock is about to trade ex-dividend in 4 days. 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Patria Investments' shares on or after the 14th of November, you won't be eligible to receive the dividend, when it is paid on the 7th of December.

The company's next dividend payment will be US$0.17 per share. Last year, in total, the company distributed US$0.71 to shareholders. Last year's total dividend payments show that Patria Investments has a trailing yield of 5.1% on the current share price of $13.94. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Patria Investments can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Patria Investments

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Patria Investments distributed an unsustainably high 200% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut.

Generally, the higher a company's payout ratio, the more the dividend is at risk of being reduced.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Patria Investments, with earnings per share up 4.6% on average over the last five years.

We'd also point out that Patria Investments issued a meaningful number of new shares in the past year. 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.

Given that Patria Investments has only been paying a dividend for a year, there's not much of a past history to draw insight from.

To Sum It Up

Should investors buy Patria Investments for the upcoming dividend? Patria Investments has been growing earnings per share at a reasonable rate, but over the last year its dividend was not well covered by earnings. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Patria Investments. To help with this, we've discovered 3 warning signs for Patria Investments (1 is a bit unpleasant!) that you ought to be aware of before buying the shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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