Park-Ohio Holdings Corp. (NASDAQ:PKOH) is about to trade ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Park-Ohio Holdings' shares on or after the 5th of August will not receive the dividend, which will be paid on the 20th of August.
The company's next dividend payment will be US$0.13 per share, and in the last 12 months, the company paid a total of US$0.50 per share. Last year's total dividend payments show that Park-Ohio Holdings has a trailing yield of 1.7% on the current share price of $29.09. If you buy this business for its dividend, you should have an idea of whether Park-Ohio Holdings's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Park-Ohio Holdings reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Luckily it paid out just 5.8% of its free cash flow last year.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Park-Ohio Holdings was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. It looks like the Park-Ohio Holdings dividends are largely the same as they were seven years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.
We update our analysis on Park-Ohio Holdings every 24 hours, so you can always get the latest insights on its financial health, here.
To Sum It Up
From a dividend perspective, should investors buy or avoid Park-Ohio Holdings? It's hard to get used to Park-Ohio Holdings paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.
Although, if you're still interested in Park-Ohio Holdings and want to know more, you'll find it very useful to know what risks this stock faces. Our analysis shows 4 warning signs for Park-Ohio Holdings that we strongly recommend you have a look at before investing in the company.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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. 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.
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