Park Aerospace (NYSE:PKE) Will Pay A Larger Dividend Than Last Year At $0.125

Park Aerospace Corp.'s (NYSE:PKE) dividend will be increasing from last year's payment of the same period to $0.125 on 4th of August. This takes the dividend yield to 3.6%, which shareholders will be pleased with.

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. At the time of the last dividend payment, Park Aerospace was paying out a very large proportion of what it was earning and 188% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

If the company can't turn things around, EPS could fall by 10.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 309%, which could put the dividend in jeopardy if the company's earnings don't improve.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of $0.40 in 2013 to the most recent total annual payment of $0.50. This means that it has been growing its distributions at 2.3% per annum over that time. 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 Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Park Aerospace's earnings per share has shrunk at 10% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think Park Aerospace will make a great income stock. The payments are bit high to be considered sustainable, and the track record isn't the best. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Park Aerospace (2 are concerning!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.