Here's What We Like About Pangaea Logistics Solutions' (NASDAQ:PANL) Upcoming Dividend
Pangaea Logistics Solutions, Ltd. (NASDAQ:PANL) stock is about to trade ex-dividend in 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Pangaea Logistics Solutions investors that purchase the stock on or after the 29th of February will not receive the dividend, which will be paid on the 15th of March.
The company's upcoming dividend is US$0.10 a share, following on from the last 12 months, when the company distributed a total of US$0.40 per share to shareholders. Based on the last year's worth of payments, Pangaea Logistics Solutions stock has a trailing yield of around 4.7% on the current share price of US$8.59. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for Pangaea Logistics Solutions
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Pangaea Logistics Solutions paid out a comfortable 44% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 94% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.
While Pangaea Logistics Solutions's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were Pangaea Logistics Solutions to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Pangaea Logistics Solutions's earnings have been skyrocketing, up 34% per annum for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Pangaea Logistics Solutions has delivered an average of 23% per year annual increase in its dividend, based on the past five years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
To Sum It Up
Has Pangaea Logistics Solutions got what it takes to maintain its dividend payments? We're glad to see the company has been improving its earnings per share while also paying out a low percentage of income. However, it's not great to see it paying out what we see as an uncomfortably high percentage of its cash flow. To summarise, Pangaea Logistics Solutions looks okay on this analysis, although it doesn't appear a stand-out opportunity.
While it's tempting to invest in Pangaea Logistics Solutions for the dividends alone, you should always be mindful of the risks involved. For example, we've found 1 warning sign for Pangaea Logistics Solutions that we recommend you consider before investing in the business.
If you're in the market for strong dividend payers, we recommend checking 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.
