Instituto Hermes Pardini S.A. (BVMF:PARD3) Passed Our Checks, And It's About To Pay A R$0.073 Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Instituto Hermes Pardini S.A. (BVMF:PARD3) is about to go ex-dividend in just two days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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 Instituto Hermes Pardini's shares on or after the 21st of September, you won't be eligible to receive the dividend, when it is paid on the 30th of September.

The company's next dividend payment will be R$0.073 per share, on the back of last year when the company paid a total of R$0.27 to shareholders. Based on the last year's worth of payments, Instituto Hermes Pardini has a trailing yield of 1.1% on the current stock price of R$24.52. 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! We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Instituto Hermes Pardini

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Instituto Hermes Pardini is paying out just 11% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 14% of its free cash flow in the last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Instituto Hermes Pardini's earnings have been skyrocketing, up 21% per annum for the past five years. Instituto Hermes Pardini looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Instituto Hermes Pardini has seen its dividend decline 22% per annum on average over the past four years, which is not great to see. Instituto Hermes Pardini is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

To Sum It Up

Is Instituto Hermes Pardini worth buying for its dividend? Instituto Hermes Pardini has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past four years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.

Wondering what the future holds for Instituto Hermes Pardini? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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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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