Is It Smart To Buy HireQuest, Inc. (NASDAQ:HQI) Before It Goes Ex-Dividend?
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see HireQuest, Inc. (NASDAQ:HQI) is about to trade ex-dividend in the next four days. This means that investors who purchase shares on or after the 30th of November will not receive the dividend, which will be paid on the 15th of December.
The upcoming dividend for HireQuest is US$0.05 per share. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for HireQuest
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. HireQuest paid out just 8.5% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. The good news is it paid out just 6.0% of its free cash flow in the last year.
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?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend.
This is HireQuest's first year of paying a dividend, so it doesn't have much of a history yet to compare to.
Final Takeaway
From a dividend perspective, should investors buy or avoid HireQuest? The company has barely grown earnings per share over this time, but at least it's paying out a decently low percentage of its earnings and cashflow as dividends. This could suggest management is reinvesting in future growth opportunities. 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. There's a lot to like about HireQuest, and we would prioritise taking a closer look at it.
On that note, you'll want to research what risks HireQuest is facing. For example, we've found 4 warning signs for HireQuest (1 makes us a bit uncomfortable!) that deserve your attention before investing in the shares.
If you're in the market for dividend stocks, we recommend checking our list of top 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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