Parkland Corporation (TSE:PKI) Is About To Go Ex-Dividend, And It Pays A 3.1% Yield

It looks like Parkland Corporation (TSE:PKI) is about to go ex-dividend in the next three days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Parkland's shares before the 21st of June in order to be eligible for the dividend, which will be paid on the 15th of July.

The company's next dividend payment will be CA$0.10 per share, and in the last 12 months, the company paid a total of CA$1.23 per share. Looking at the last 12 months of distributions, Parkland has a trailing yield of approximately 3.1% on its current stock price of CA$39.39. If you buy this business for its dividend, you should have an idea of whether Parkland's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Parkland

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Last year, Parkland paid out 95% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. The good news is it paid out just 21% of its free cash flow in the last year.

It's good to see that while Parkland's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if this were to happen repeatedly, we'd be concerned about whether the dividend is sustainable in a downturn.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Parkland has grown its earnings rapidly, up 23% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Parkland's dividend payments are effectively flat on where they were 10 years ago.

Final Takeaway

Should investors buy Parkland for the upcoming dividend? It's good to see earnings per share growing and low cashflow payout ratio, although we're uncomfortable with Parkland's paying out such a high percentage of its profit. In summary, it's hard to get excited about Parkland from a dividend perspective.

So while Parkland looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 2 warning signs for Parkland that we strongly recommend you have a look at before investing in the company.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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