Park Aerospace (NYSE:PKE) Has Affirmed Its Dividend Of US$0.10

Park Aerospace Corp. (NYSE:PKE) has announced that it will pay a dividend of US$0.10 per share on the 4th of August. Based on this payment, the dividend yield on the company's stock will be 3.2%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Park Aerospace

Park Aerospace Doesn't Earn Enough To Cover Its Payments

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the company was paying out 97% of what it was earning. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

EPS is set to fall by 4.9% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 102%, which is definitely a bit high to be sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. There hasn't been much of a change in the dividend over the last 10. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though Park Aerospace's EPS has declined at around 4.9% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

Park Aerospace's Dividend Doesn't Look Great

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Park Aerospace make more consistent payments in the future. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. We don't think that this is a great candidate to be an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Park Aerospace that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.