In this work we investigate the magnetic properties and structure of ultrathin Pd/Co/Au(111) stacks prepared by sequential electrodeposition. A combination of in situ real-time magneto optical Kerr effect (MOKE), in situ surface X-ray diffraction (SXRD), and complementary in situ scanning tunneling microscopy, electrochemical studies, and optical reflectivity measurements is employed to characterize the formation of the Pd/Co deposit and its potential-dependent structure. For the preparation of the Pd/Co film a specific procedure is used that prevents Co dissolution. The SXRD results reveal a 2D growth of a (111)-oriented Pd layer, which is in epitaxy with the underlying Co(001)/Au(111). A potential dependent study demonstrates that the Co magnetic properties are reversibly modified upon hydrogen absorption in and release out of the Pd capping film, respectively. Analysis of the SXRD data indicates a Pd lattice expansion upon H-absorption, which is strongly inhibited within the surface plane due to clamping by the substrate. The transmission of hydrogen-induced strain to the Co layer is measured and the resulting impact on the magnetic properties is estimated and discussed.