Vinci Partners Investments Ltd. (NASDAQ:VINP) has announced that on 15th of March, it will be paying a dividend ofR$0.17, which a reduction from last year’s comparable dividend. The dividend yield of 7.0% is still a nice boost to shareholder returns, despite the cut.
View our latest analysis for Vinci Partners Investments
Vinci Partners Investments’ Payment Has Solid Earnings Coverage
Impressive dividend yields are good, but this doesn’t matter much if the payments can’t be sustained. Prior to this announcement, Vinci Partners Investments’ dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 140% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.
Over the next year, EPS is forecast to expand by 157.5%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 6.9% which would be quite comfortable going to take the dividend forward.
Vinci Partners Investments Is Still Building Its Track Record
The company hasn’t been paying a dividend for very long at all, so we can’t really make a judgement on how stable the dividend has been. This doesn’t mean that the company can’t pay a good dividend, but just that we want to wait until it can prove itself.
Dividend Growth Is Doubtful
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let’s not jump to conclusions as things might not be as good as they appear on the surface. It’s not great to see that Vinci Partners Investments’ earnings per share has fallen at approximately 9.3% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely – the opposite of dividend growth. It’s not all bad news though, as the earnings are predicted to rise over the next 12 months – we would just be a bit cautious until this can turn into a longer term trend.
The Dividend Could Prove To Be Unreliable
Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The track record isn’t great, and the payments are a bit high to be considered sustainable. We don’t think Vinci Partners Investments is a great stock to add to your portfolio if income is your focus.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we’ve identified 1 warning sign for Vinci Partners Investments that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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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