The board of Parkland Corporation (TSE:PKI) has announced that it will pay a dividend of CA$0.10 per share on the 15th of September. The dividend yield is 3.2% based on this payment, which is a little bit low compared to the other companies in the industry.
Check out our latest analysis for Parkland
Parkland's Earnings Easily Cover the Distributions
Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Parkland's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.
Analysts expect a massive rise in earnings per share in the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 60% which is fairly sustainable.
Parkland Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The first annual payment during the last 10 years was CA$1.26 in 2011, and the most recent fiscal year payment was CA$1.23. Dividend payments have shrunk at a rate of less than 1% per annum over this time frame. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
Dividend Growth May Be Hard To Achieve
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, Parkland's EPS was effectively flat over the past five years, which could stop the company from paying more every year. The company is paying out a lot of its profits, even though it is growing those profits pretty slowly. As they say in finance, 'past performance is not indicative of future performance', but we are not confident a company with limited earnings growth and a high payout ratio will be a star dividend-payer over the next decade.
Our Thoughts On Parkland's Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Parkland's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. This company is not in the top tier of income providing stocks.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 4 warning signs for Parkland you should be aware of, and 1 of them is concerning. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
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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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About TSX:PKI
Parkland
Operates food and convenience stores in Canada, the United States, and internationally.
Average dividend payer slight.
