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. This means that the annual payment will be 7.7% of the current stock price, which is in line with the average for the industry.

See our latest analysis for Pangaea Logistics Solutions

Pangaea Logistics Solutions' Future Dividends May Potentially Be At Risk

Solid dividend yields are great, but they only really help us if the payment is sustainable. 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.

Over the next year, EPS is forecast to expand by 79.2%. If the dividend continues on its recent course, the payout ratio in 12 months could be 96%, which is a bit high and could start applying pressure to the balance sheet.

Pangaea Logistics Solutions' Dividend Has Lacked Consistency

Pangaea Logistics Solutions has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2019, the dividend has gone from $0.14 total annually to $0.40. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. 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.

Dividend Growth May Be Hard To Achieve

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. However, Pangaea Logistics Solutions' EPS was effectively flat over the past five years, which could stop the company from paying more every year.

We should note that Pangaea Logistics Solutions has issued stock equal to 40% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Pangaea Logistics Solutions' payments, as there could be some issues with sustaining them into the future. The track record isn't great, and the payments are a bit high to be considered sustainable. 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. Case in point: We've spotted 3 warning signs for Pangaea Logistics Solutions (of which 1 shouldn't be ignored!) you should know about. 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.