Spok Holdings (NASDAQ:SPOK) Will Pay A Dividend Of $0.3125

The board of Spok Holdings, Inc. (NASDAQ:SPOK) has announced that it will pay a dividend of $0.3125 per share on the 24th of June. This makes the dividend yield 8.4%, which will augment investor returns quite nicely.

Check out our latest analysis for Spok Holdings

Spok 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. Before making this announcement, the company's dividend was much higher than its earnings. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

The next 12 months is set to see EPS grow by 3.8%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 159%, which probably can't continue without putting some pressure on the balance sheet.

Spok Holdings Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $0.50 in 2014 to the most recent total annual payment of $1.25. This means that it has been growing its distributions at 9.6% per annum 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' Dividend Might Lack Growth

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Spok Holdings has been growing its earnings per share at 33% a 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 probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Spok Holdings has 3 warning signs (and 1 which shouldn't be ignored) we think 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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