Heidrick & Struggles International, Inc. (NASDAQ:HSII) stock is about to trade ex-dividend in 4 days time. This means that investors who purchase shares on or after the 8th of August will not receive the dividend, which will be paid on the 23rd of August.
Heidrick & Struggles International's next dividend payment will be US$0.15 per share, on the back of last year when the company paid a total of US$0.60 to shareholders. Calculating the last year's worth of payments shows that Heidrick & Struggles International has a trailing yield of 2.0% on the current share price of $29.47. If you buy this business for its dividend, you should have an idea of whether Heidrick & Struggles International's dividend is reliable and sustainable. As a result, readers should always check whether Heidrick & Struggles International has been able to grow its dividends, or if the dividend might be cut.
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. Heidrick & Struggles International is paying out just 20% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. The good news is it paid out just 13% of its free cash flow in the last year.
It's positive to see that Heidrick & Struggles International'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.
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. That's why it's comforting to see Heidrick & Struggles International's earnings have been skyrocketing, up 52% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Heidrick & Struggles International looks like a promising growth company.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Heidrick & Struggles International has delivered 1.4% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because Heidrick & Struggles International is keeping back more of its profits to grow the business.
To Sum It Up
Is Heidrick & Struggles International worth buying for its dividend? We love that Heidrick & Struggles International is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Overall we think this is an attractive combination and worthy of further research.
Curious what other investors think of Heidrick & Struggles International? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow .
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.