HireQuest, Inc. (NASDAQ:HQI) Looks Interesting, And It's About To Pay A Dividend
Readers hoping to buy HireQuest, Inc. (NASDAQ:HQI) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 26th of February, you won't be eligible to receive this dividend, when it is paid on the 15th of March.
The upcoming dividend for HireQuest is US$0.05 per share. If you buy this business for its dividend, you should have an idea of whether HireQuest's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Check out our latest analysis for HireQuest
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. HireQuest has a low and conservative payout ratio of just 8.5% of its income after tax. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 6.0% of its free cash flow as dividends last year, which is conservatively low.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see how much of its profit HireQuest paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time.
This is HireQuest's first year of paying a dividend, which is exciting for shareholders - but it does mean there's no dividend history to examine.
The Bottom Line
From a dividend perspective, should investors buy or avoid HireQuest? Earnings per share have been flat over this time, but we're intrigued to see that HireQuest 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 strong earnings per share growth with a low payout ratio, and HireQuest is halfway there. It's a promising combination that should mark this company worthy of closer attention.
In light of that, while HireQuest has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 3 warning signs for HireQuest (1 is concerning!) that you ought to be aware of before buying the shares.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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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