Patria Investments (NASDAQ:PAX) Is Paying Out A Larger Dividend Than Last Year

Patria Investments Limited (NASDAQ:PAX) has announced that it will be increasing its dividend from last year's comparable payment on the 22nd of March to $0.308. This will take the annual payment to 4.2% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Patria Investments

Patria Investments Is Paying Out More Than It Is Earning

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Earnings per share could rise by 1.6% over the next year if things go the same way as they have for the last few years. Assuming the dividend continues along recent trends, we think the payout ratio could reach 283%, which probably can't continue without starting to put some pressure on the balance sheet.

Patria Investments' Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. Since 2021, the dividend has gone from $0.424 total annually to $0.709. This implies that the company grew its distributions at a yearly rate of about 29% over that duration. Patria Investments has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Patria Investments May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, Patria Investments' EPS was effectively flat over the past five years, which could stop the company from paying more every year. The earnings growth is anaemic, and the company is paying out 166% of its profit. This gives limited room for the company to raise the dividend in the future.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The track record isn't great, and the payments are a bit high to be considered sustainable. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for Patria Investments (of which 1 is a bit concerning!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of 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.