Ark Restaurants' (NASDAQ:ARKR) Shareholders Will Receive A Bigger Dividend Than Last Year
The board of Ark Restaurants Corp. (NASDAQ:ARKR) has announced that it will be increasing its dividend by 50% on the 13th of June to $0.1875, up from last year's comparable payment of $0.125. This will take the dividend yield to an attractive 2.8%, providing a nice boost to shareholder returns.
Check out our latest analysis for Ark Restaurants
Ark Restaurants' Dividend Is Well Covered By Earnings
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, Ark Restaurants' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share could rise by 16.3% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 15%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was $1.00 in 2013, and the most recent fiscal year payment was $0.50. This works out to be a decline of approximately 6.7% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
The Dividend Looks Likely To Grow
Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. It's encouraging to see that Ark Restaurants has been growing its earnings per share at 16% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
We Really Like Ark Restaurants' Dividend
Overall, a dividend increase is always good, and we think that Ark Restaurants is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 4 warning signs for Ark Restaurants that investors should know about before committing capital to this stock. Is Ark Restaurants 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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