Park-Ohio Holdings (NASDAQ:PKOH) Is Due To Pay A Dividend Of $0.125

Park-Ohio Holdings Corp. (NASDAQ:PKOH) will pay a dividend of $0.125 on the 19th of August. This means the annual payment is 2.9% of the current stock price, which is above the average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Park-Ohio Holdings' stock price has increased by 53% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Park-Ohio Holdings

Park-Ohio Holdings Doesn't Earn Enough To Cover Its Payments

If the payments aren't sustainable, a high yield for a few years won't matter that much. Even in the absence of profits, Park-Ohio Holdings is paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

The next 12 months is set to see EPS grow by 104.2%. If the dividend continues on its recent course, the company could be paying out several times what it earns in the next 12 months, which could start applying pressure to the balance sheet.

Park-Ohio Holdings' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. There hasn't been much of a change in the dividend over the last 8 years. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Park-Ohio Holdings' earnings per share has shrunk at 43% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Park-Ohio Holdings' Dividend Doesn't Look Great

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Park-Ohio Holdings make more consistent payments in the future. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, the dividend is not reliable enough to make this a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Park-Ohio Holdings has 3 warning signs (and 2 which are concerning) we think you should know about. Is Park-Ohio Holdings not quite the opportunity you were looking for? Why not check out our selection of top 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.