HireQuest's (NASDAQ:HQI) Dividend Will Be $0.06

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2 days ago

HireQuest, Inc. (NASDAQ:HQI) will pay a dividend of $0.06 on the 16th of June. This means the annual payment is 2.4% of the current stock price, which is above the average for the industry.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. HireQuest's stock price has reduced by 34% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.
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We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, HireQuest's dividend made up quite a large proportion of earnings but only 23% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.
EPS is set to grow by 16.0% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 89% - on the higher side, but we wouldn't necessarily say this is unsustainable.
View our latest analysis for HireQuest
The dividend's track record has been pretty solid, but with only 5 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from an annual total of $0.20 in 2020 to the most recent total annual payment of $0.24. This works out to be a compound annual growth rate (CAGR) of approximately 3.7% a year over that time. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, HireQuest's EPS was effectively flat over the past five years, which could stop the company from paying more every year. HireQuest's earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. When the rate of return on reinvestment opportunities falls below a certain minimum level, companies often elect to pay a larger dividend instead. This is why many mature companies often have larger dividend yields.
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about HireQuest's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think HireQuest is a great stock to add to your portfolio if income is your focus.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 3 warning signs for HireQuest that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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