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Spok Holdings, Inc. (NASDAQ:SPOK) will pay a dividend of $0.3125 on the 9th of December. This makes the dividend yield 8.1%, which will augment investor returns quite nicely.
View our latest analysis for Spok Holdings
Estimates Indicate Spok Holdings' Could Struggle to Maintain Dividend Payments In The Future
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, the dividend made up 88% of cash flows, but a higher proportion of net income. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business.
Over the next year, EPS is forecast to expand by 5.8%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 180%, 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 implies that the company grew its distributions at a yearly rate of about 9.6% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
Spok Holdings' Dividend Might Lack Growth
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Spok Holdings has impressed us by growing EPS at 44% per year over the past five years. Although earnings per share is up nicely Spok Holdings is paying out 172% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.
Our Thoughts On Spok Holdings' Dividend
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. 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. Taking the debate a bit further, we've identified 3 warning signs for Spok Holdings that investors need to be conscious of moving forward. 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.