A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, The Hackett Group Inc (NASDAQ:HCKT) has been paying a dividend to shareholders. Today it yields 1.9%. Should it have a place in your portfolio? Let’s take a look at Hackett Group in more detail.
Here’s how I find good dividend stocks
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has it increased its dividend per share amount over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
How well does Hackett Group fit our criteria?
Hackett Group has a trailing twelve-month payout ratio of 28%, which means that the dividend is covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Unfortunately, it is really too early to view Hackett Group as a dividend investment. It has only been consistently paying dividends for 6 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Hackett Group has a yield of 1.9%, which is high for IT stocks but still below the market’s top dividend payers.
After digging a little deeper into Hackett Group’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three essential factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for HCKT’s future growth? Take a look at our free research report of analyst consensus for HCKT’s outlook.
- Valuation: What is HCKT worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether HCKT is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.