Pangaea Logistics Solutions (NASDAQ:PANL) Has Announced A Dividend Of $0.10

The board of Pangaea Logistics Solutions, Ltd. (NASDAQ:PANL) has announced that it will pay a dividend of $0.10 per share on the 14th of March. Based on this payment, the dividend yield will be 7.7%, which is fairly typical for the industry.

See our latest analysis for Pangaea Logistics Solutions

Pangaea Logistics Solutions' Projections Indicate Future Payments May Be Unsustainable

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, Pangaea Logistics Solutions' dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 207% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

The next 12 months is set to see EPS grow by 79.2%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 96% over the next year.

Pangaea Logistics Solutions' Dividend Has Lacked Consistency

It's comforting to see that Pangaea Logistics Solutions has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of $0.14 in 2019 to the most recent total annual payment of $0.40. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. Pangaea Logistics Solutions has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Pangaea Logistics Solutions May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Pangaea Logistics Solutions hasn't seen much change in its earnings per share over the last five years.

An additional note is that the company has been raising capital by issuing stock equal to 40% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments are bit high to be considered sustainable, and the track record isn't the best. Overall, we don't think this company has the makings of a good income stock.

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. For example, we've identified 3 warning signs for Pangaea Logistics Solutions (1 is potentially serious!) 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.