Park Aerospace (NYSE:PKE) Is Increasing Its Dividend To $0.125
Park Aerospace Corp. (NYSE:PKE) will increase its dividend from last year's comparable payment on the 5th of May to $0.125. This makes the dividend yield 2.9%, which is above the industry average.
View our latest analysis for Park Aerospace
Park Aerospace Is Paying Out More Than It Is Earning
A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 103% of what it was earning. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.
Earnings per share could rise by 16.0% over the next year if things go the same way as they have for the last few years. If the dividend continues on its recent course, the payout ratio in 12 months could be 315%, which is a bit high and could start applying pressure to the balance sheet.
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. There hasn't been much of a change in the dividend over the last 10 years. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.
Park Aerospace's Dividend Might Lack Growth
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Park Aerospace has impressed us by growing EPS at 16% per year over the past five years. However, the company isn't reinvesting a lot back into the business, so we would expect the growth rate to slow down somewhat in the future.
The Dividend Could Prove To Be Unreliable
Overall, we always like to see the dividend being raised, but we don't think Park Aerospace will make a great income stock. Strong earnings growth means Park Aerospace has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We would probably look elsewhere for an income investment.
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. For instance, we've picked out 2 warning signs for Park Aerospace that investors should take into consideration. Is Park Aerospace not quite the opportunity you were looking for? Why not check out our selection of top 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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