Park-Ohio Holdings (NASDAQ:PKOH) Is Paying Out A Dividend Of $0.125

Park-Ohio Holdings Corp. (NASDAQ:PKOH) will pay a dividend of $0.125 on the 19th of May. This makes the dividend yield 4.0%, which will augment investor returns quite nicely.

View our latest analysis for Park-Ohio Holdings

Park-Ohio Holdings' Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Park-Ohio Holdings was earning enough to cover the dividend, but it wasn't generating any free cash flows. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

The next year is set to see EPS grow by 65.7%. If the dividend continues on this path, the payout ratio could be 35% by next year, which we think can be pretty sustainable going forward.

Park-Ohio Holdings' Dividend Has Lacked Consistency

Park-Ohio Holdings 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. The payments haven't really changed that much since 9 years ago. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been sinking by 19% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

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 Park-Ohio Holdings' payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, Park-Ohio Holdings has 3 warning signs (and 1 which shouldn't be ignored) 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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