Spok Holdings (NASDAQ:SPOK) Has Affirmed Its Dividend Of $0.3125

Spok Holdings, Inc. (NASDAQ:SPOK) will pay a dividend of $0.3125 on the 29th of March. This means the annual payment is 7.4% of the current stock price, which is above the average for the industry.

View our latest analysis for Spok Holdings

Spok Holdings Is Paying Out More Than It Is Earning

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the company was paying out 159% of what it was earning. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Over the next year, EPS is forecast to expand by 7.9%. If the dividend continues on its recent course, the payout ratio in 12 months could be 161%, which is a bit high and could start applying pressure to the balance sheet.

Spok Holdings Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the dividend has gone from $0.50 total annually to $1.25. This works out to be a compound annual growth rate (CAGR) of approximately 9.6% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Spok Holdings Might Find It Hard To Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Spok Holdings has grown earnings per share at 26% per year over the past five years. Strong earnings is nice to see, but unless this can be sustained on minimal reinvestment of profits, we would question whether dividends will follow suit.

Spok Holdings' Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Spok Holdings' payments, as there could be some issues with sustaining them into the future. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Case in point: We've spotted 2 warning signs for Spok Holdings (of which 1 doesn't sit too well with us!) you should know about. Is Spok 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.