Pangaea Logistics Solutions, Ltd. (NASDAQ:PANL) has announced that it will pay a dividend of $0.10 per share on the 13th of December. This means that the annual payment will be 6.7% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Pangaea Logistics Solutions

Pangaea Logistics Solutions' Future Dividend Projections Appear Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, Pangaea Logistics Solutions was paying out quite a large proportion of both earnings and cash flow, with the dividend being 149% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

Over the next year, EPS is forecast to expand by 57.9%. If the dividend continues along recent trends, we estimate the payout ratio could reach 79%, which is on the higher side, but certainly still feasible.

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. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2018, the dividend has gone from $0.14 total annually to $0.40. This means that it has been growing its distributions at 19% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Pangaea Logistics Solutions May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Earnings have grown at around 4.9% a year for the past five years, which isn't massive but still better than seeing them shrink. Earnings are not growing quickly at all, and the company is paying out most of its profit as dividends. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Pangaea Logistics Solutions that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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