Last update on 2024-06-27

Park-Ohio Holdings (PKOH) - Dividend Analysis (Final Score: 4/8)

Detailed analysis of Park-Ohio Holdings (PKOH) dividend policy scoring a 4/8 on 8-criteria. Insights cover yield, payout ratio, consistency, and stability.

Short Analysis - Dividend Score: 4

We're running Park-Ohio Holdings (PKOH) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Park-Ohio Holdings' dividend analysis was based on an 8-criteria scoring system. They received a score of 4 out of 8, suggesting some strengths but significant weaknesses too. Here's a quick breakdown: 1. **Dividend Yield**: PKOH's current dividend yield is 1.8546%, above the industry average of 1.36%. However, their yield has been volatile over the years. 2. **Dividend Growth**: The growth rate of dividends is erratic and has varied significantly over the past 20 years, indicating inconsistency and unreliability. 3. **Payout Ratio**: While overall low on average, the payout ratio has shown notable instability with high figures in recent years, signaling potential issues. 4. **Earnings Coverage**: Dividends haven't always been well-covered by earnings, presenting increased financial risk. 5. **Cash Flow Coverage**: Mixed trends where dividends were sometimes well-covered by cash flow and other times not, lately showing negative Figures. 6. **Stability**: Periodically stable from 2014, but not continuously for a long duration. 7. **Continuity Over 25 Years**: PKOH doesn't meet the criterion of paying dividends for over 25 years, having only started in 2014 with some reductions thereafter. 8. **Stock Repurchases**: The analysis did not provide insights into this criterion.

Insights for Value Investors Seeking Stable Income

Given Park-Ohio Holdings' (PKOH) mixed performance on its dividend analysis, scoring only 4 out of 8, there are several concerns for prospective investors. The instability in dividend growth, earnings coverage, and cash flow coverage suggest financial volatility. The lack of long-term, stable dividend history further weakens its attractiveness as a reliable dividend-paying stock. Therefore, while the above-average dividend yield is appealing, the inconsistencies and limited history might deter conservative investors looking for steady and dependable returns. Investors should approach with caution and consider these factors when evaluating PKOH as a dividend investment.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Explanation of dividend yield concept and its importance for investors.

Park-Ohio Holdings (PKOH) has a current dividend yield of 1.8546%, which is above the industry average of 1.36%. This higher dividend yield indicates that PKOH is offering investors a better income return on their investment compared to the average industry performance. Over the past 20 years, PKOH's dividend yield has shown variability, peaking at 4.0883% in 2022 and hitting a low of 0% before 2014. While the recent yield is a positive sign, the significant fluctuations could indicate potential volatility in its future dividends. Coupled with stock price trends, PKOH's yield variation suggests a mixed scenario. Their dividend per share has remained flat at $0.5 post-2014, with only slight decreases in certain years. Overall, the current above-average yield is good, but past fluctuations pose caution.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate criterion often helps investors understand how reliably a company increases its dividend payments over a period of time. A rate higher than 5% suggests solid performance and potential for attractive income sources.

To evaluate the dividend growth rate for Park-Ohio Holdings (PKOH) over the last 20 years, we can analyze the given Dividend Ratio values to compare Year-over-Year (YoY) changes. Based on the Dividend Ratio data, we notice that from 2003 until 2011, the company paid no dividends. In 2012, the Dividend Ratio shows an odd 33.33% value, before returning to zero until 2020, when it sharply fell to -50%, before rising to 100% in 2021. By 2023, dividends again fell back to zero. Despite a perceived Average Dividend Growth Ratio of 3.97%, such intermittent dividend payouts and significant fluctuations indicate inconsistency and unreliability in dividend growth. This erratic pattern is not necessarily favorable for investors seeking steady and growing returns in dividends.

Average annual Payout Ratio lower than 65% in the last 20 years?

The payout ratio represents the portion of earnings paid out as dividends. A ratio lower than 65% is considered sustainable.

The provided payout ratio data for Park-Ohio Holdings (PKOH) over the last 20 years shows a largely uneven and, at times, negative trend. Although the average payout ratio over this period is approximately 1.76%, several years—particularly 2020 to 2023—indicate significant outliers, including years with negative payout ratios and an exceptionally high payout ratio of about 78.8% in 2023. Despite this instability, the average payout ratio remains well below the 65% threshold. This is a good trend, suggesting that, on average, the company has historically maintained a conservative approach to dividends relative to its earnings, which promotes financial stability. However, the recent volatility could be a matter of concern for investors prioritizing consistent dividend payouts.

Dividends Well Covered by Earnings?

Dividends being well covered by earnings means that a company's earnings are sufficient to cover the dividend payments it makes to shareholders. This is important because it signifies financial stability and sustainability of the dividend payouts.

Evaluating Park-Ohio Holdings (PKOH) over the years, we observe considerable fluctuations in Earnings Per Share (EPS) alongside dividend payouts. While the company did not pay dividends prior to 2014, starting from 2014, the dividends per share were minimally covered by the EPS, with the most substantial coverage in 2023 at 78.8%. However, EPS has been negative in multiple years, highlighting instance where dividends were not covered, particularly in 2020, 2021, and the significant dip in 2023. Though recent trends show an improvement, the inconsistencies in EPS and insufficient coverage during some years illustrate higher financial risk. Therefore, overall, the company’s dividends show a mixed but improving trend in alignment with EPS coverage. This trend is worrisome due to the overall inconsistent earnings coverage.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow means that the company generates enough free cash flow to pay out dividends. It shows the financial stability of the company.

Analyzing Park-Ohio Holdings (PKOH), their free cash flow and dividend payout trends from 2003 to 2023 indicates varying capacity in covering dividends. For several years, notably 2003-2012, the company did not distribute dividends. Starting from 2014, dividends were consistent, but coverage by free cash flow exhibited considerable variability. From 2014 to 2023, dividend cover ratios fluctuated greatly, with highlights in 2015 and 2018 where ratios were 0.768 and 0.659 respectively, suggesting robust coverage. However, negative free cash flows in 2020 and 2021 resulted in ratios of -0.202 and -0.130, underscoring periods of financial stress. This variance signals instability in consistently covering dividends, a trend that warrants attention for potential investors. Therefore, while the firm has seen periods of strong dividend coverage, the inconsistency and recent negative ratios present a mixed trend, potentially hinting at underlying financial volatility which is crucial for current and prospective stakeholders.

Stable Dividends Since the Company Began Paying Dividends?

Explain the criterion for Park-Ohio Holdings (PKOH) and why it is important to consider

Dividend stability is essential for income-seeking investors who rely heavily on regular payouts as a form of passive income. Ensuring no major drop in dividends provides assurance against unexpected income disruptions, which is crucial for financial planning and security.

Dividends Paid for Over 25 Years?

Explain the criterion for Park-Ohio Holdings (PKOH) and why it is important to consider

Analyzing whether Park-Ohio Holdings has paid dividends for over 25 years is crucial in assessing the company’s reliability and stability as a dividend-paying entity. Consistency in dividend payments over a long term can be an indicator of the company’s profitability and its commitment to returning value to shareholders. Hence, it is an essential criterion for potential and current investors. Upon examining Park-Ohio Holdings' dividend payment history from 1998 to 2023, it is evident that the company did not pay any dividends from 1998 to 2014. Commencing in 2014, Park-Ohio Holdings declared an annual dividend of $0.375 per share. This increased to $0.50 before stabilizing at $0.50 per share annually from 2015 to 2019. However, in 2020, the dividend per share dropped to $0.25, only to return to $0.50 annually in 2021 through 2023. This analysis reveals that Park-Ohio Holdings has not paid dividends continuously for over 25 years. The company only began paying dividends in 2014 and has faced fluctuations, such as the drop in 2020, likely due to the financial impact of the COVID-19 pandemic. Consequently, while the trend of paying dividends over the past decade is favorable, the lack of a prolonged history weakens the reliability as a long-term dividend-paying entity in this specific criteria. Investors might require more consistent and extensive history to consider it a steadfast dividend investment.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Park-Ohio Holdings (PKOH) and why it is important to consider

Reliable stock repurchases refer to the consistent buyback of shares by a company over a given period. This action can indicate strong financial health and management's confidence in the intrinsic value of the company. It is also important because repurchasing shares can increase the value of the remaining shares, providing potential capital gains for shareholders.