Vinci Partners Investments (NASDAQ:VINP) Will Pay A Smaller Dividend Than Last Year

Vinci Partners Investments Ltd. (NASDAQ:VINP) is reducing its dividend from last year's comparable payment to R$0.16 on the 9th of June. The dividend yield of 9.2% is still a nice boost to shareholder returns, despite the cut.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Vinci Partners Investments' stock price has reduced by 32% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

View our latest analysis for Vinci Partners Investments

Vinci Partners Investments' Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. At the time of the last dividend payment, Vinci Partners Investments was paying out a very large proportion of what it was earning and 132% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

Looking forward, earnings per share is forecast to rise by 137.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 7.8%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Vinci Partners Investments Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2021, the annual payment back then was R$3.1, compared to the most recent full-year payment of R$3.47. This works out to be a compound annual growth rate (CAGR) of approximately 5.8% a year over that time. Vinci Partners Investments has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Earnings per share has been sinking by 10% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Vinci Partners Investments' Dividend Doesn't Look Sustainable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The payments are bit high to be considered sustainable, and the track record isn't the best. We don't think Vinci Partners Investments is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Vinci Partners Investments that you should be aware of before investing. 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.