The Hackett Group, Inc. (NASDAQ:HCKT) Passed Our Checks, And It's About To Pay A US$0.11 Dividend
It looks like The Hackett Group, Inc. (NASDAQ:HCKT) is about to go ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Hackett Group investors that purchase the stock on or after the 21st of March will not receive the dividend, which will be paid on the 5th of April.
The company's next dividend payment will be US$0.11 per share, and in the last 12 months, the company paid a total of US$0.44 per share. Last year's total dividend payments show that Hackett Group has a trailing yield of 1.8% on the current share price of US$24.18. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for Hackett Group
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Hackett Group paid out a comfortable 35% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 36% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Hackett Group's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Hackett Group, with earnings per share up 5.9% on average over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Hackett Group has delivered 16% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Final Takeaway
Should investors buy Hackett Group for the upcoming dividend? Earnings per share growth has been growing somewhat, and Hackett Group is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Hackett Group is halfway there. Overall we think this is an attractive combination and worthy of further research.
Ever wonder what the future holds for Hackett Group? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.
