Lucky Strike Entertainment's (NYSE:LUCK) Upcoming Dividend Will Be Larger Than Last Year's

The board of Lucky Strike Entertainment Corporation (NYSE:LUCK) has announced that it will be increasing its dividend by 9.1% on the 8th of December to $0.06, up from last year's comparable payment of $0.055. This takes the dividend yield to 2.7%, which shareholders will be pleased with.

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Lucky Strike Entertainment's Distributions May Be Difficult To Sustain

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Lucky Strike Entertainment is unprofitable despite paying a dividend, and it is paying out 193% of its free cash flow. This is quite a strong warning sign that the dividend may not be sustainable.

Analysts expect the EPS to grow by 91.5% over the next 12 months. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. Unless this happens fairly soon, the dividend could start to come under pressure.

Check out our latest analysis for Lucky Strike Entertainment

Lucky Strike Entertainment Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The payments haven't really changed that much since 2 years ago. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

The Company Could Face Some Challenges Growing The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Lucky Strike Entertainment has impressed us by growing EPS at 40% per year over the past five years. While the company is not yet turning a profit, it is growing at a good rate. If this trajectory continues and the company can turn a profit soon, it could bode well for the dividend going forward.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Lucky Strike Entertainment has 2 warning signs (and 1 which is a bit concerning) we think 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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