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The board of The Hackett Group, Inc. (NASDAQ:HCKT) has announced that it will pay a dividend on the 8th of October, with investors receiving US$0.10 per share. The dividend yield will be 2.1% based on this payment which is still above the industry average.
Hackett Group's Dividend Is Well Covered By Earnings
If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite easily covered by Hackett Group's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
The next year is set to see EPS grow by 41.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 45% by next year, which is in a pretty sustainable range.
Hackett Group Is Still Building Its Track Record
It is great to see that Hackett Group has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The first annual payment during the last 9 years was US$0.10 in 2012, and the most recent fiscal year payment was US$0.40. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.
The Dividend's Growth Prospects Are Limited
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings has been rising at 4.3% per annum over the last five years, which admittedly is a bit slow. Hackett Group is struggling to find viable investments, so it is returning more to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.
Our Thoughts On Hackett Group's Dividend
In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Hackett Group that you should be aware of before investing. We have also put together a list of global stocks with a solid dividend.
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.
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