Readers hoping to buy Park-Ohio Holdings Corp. (NASDAQ:PKOH) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You will need to purchase shares before the 13th of February to receive the dividend, which will be paid on the 28th of February.
Park-Ohio Holdings's upcoming dividend is US$0.13 a share, following on from the last 12 months, when the company distributed a total of US$0.50 per share to shareholders. Looking at the last 12 months of distributions, Park-Ohio Holdings has a trailing yield of approximately 1.7% on its current stock price of $30.29. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Park-Ohio Holdings has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Park-Ohio Holdings
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Park-Ohio Holdings has a low and conservative payout ratio of just 13% of its income after tax. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 28% of its free cash flow in the past year.
It's positive to see that Park-Ohio Holdings's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Park-Ohio Holdings earnings per share are up 2.1% per annum over the last five years. Recent growth has not been impressive. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Park-Ohio Holdings's dividend payments are broadly unchanged compared to where they were six years ago.
Final Takeaway
From a dividend perspective, should investors buy or avoid Park-Ohio Holdings? Earnings per share growth has been growing somewhat, and Park-Ohio Holdings is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Park-Ohio Holdings is halfway there. It's a promising combination that should mark this company worthy of closer attention.
Wondering what the future holds for Park-Ohio Holdings? See what the four analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
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February 08, 2020 at 09:38PM
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Park-Ohio Holdings Corp. (NASDAQ:PKOH) Passed Our Checks, And It's About To Pay A US$0.13 Dividend - Yahoo Finance
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