Dividend Investors: Don’t Be Too Quick To Buy Patria Investments Limited (NASDAQ:PAX) For Its Upcoming Dividend

Patria Investments Limited (NASDAQ:PAX) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before a company’s record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn’t show on the record date. This means that investors who purchase Patria Investments’ shares on or after the 18th of May will not receive the dividend, which will be paid on the 11th of June.

The company’s next dividend payment will be US$0.1625 per share, on the back of last year when the company paid a total of US$0.65 to shareholders. Based on the last year’s worth of payments, Patria Investments stock has a trailing yield of around 5.8% on the current share price of US$11.29. We love seeing companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our golden goose! As a result, readers should always check whether Patria Investments has been able to grow its dividends, or if the dividend might be cut.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Patria Investments paid out 132% of profit in the past year, which we think is typically not sustainable unless there are mitigating characteristics such as unusually strong cash flow or a large cash balance.

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

View our latest analysis for Patria Investments

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

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. So we’re not too excited that Patria Investments’s earnings are down 3.4% a year over the past five years.

Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Patria Investments has delivered 8.9% dividend growth per year on average over the past five years. The only way to pay higher dividends when earnings are shrinking is either to pay out a larger percentage of profits, spend cash from the balance sheet, or borrow the money. Patria Investments is already paying out 132% of its profits, and with shrinking earnings we think it’s unlikely that this dividend will grow quickly in the future.

The Bottom Line

From a dividend perspective, should investors buy or avoid Patria Investments? Earnings per share are in decline and Patria Investments is paying out what we feel is an uncomfortably high percentage of its profit as dividends. It’s not that we hate the business, but we feel that these characeristics are not desirable for investors seeking a reliable dividend stock to own for the long term. Patria Investments doesn’t appear to have a lot going for it, and we’re not inclined to take a risk on owning it for the dividend.

With that in mind though, if the poor dividend characteristics of Patria Investments don’t faze you, it’s worth being mindful of the risks involved with this business. To help with this, we’ve discovered 2 warning signs for Patria Investments that you should be aware of before investing in their shares.

Generally, we wouldn’t recommend just buying the first dividend stock you see. Here’s a curated list of interesting stocks that are strong dividend payers.

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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.