HireQuest (NASDAQ:HQI) Has Affirmed Its Dividend Of $0.06

The board of HireQuest, Inc. (NASDAQ:HQI) has announced that it will pay a dividend on the 16th of June, with investors receiving $0.06 per share. The dividend yield will be 2.5% based on this payment which is still above the industry average.

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 33% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

We've discovered 3 warning signs about HireQuest. View them for free.

HireQuest's Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before this announcement, HireQuest was paying out 91% of earnings, but a comparatively small 23% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Earnings per share is forecast to rise by 16.0% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 89% which is a bit high but can definitely be sustainable.

View our latest analysis for HireQuest

HireQuest Is Still Building Its Track Record

HireQuest's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The dividend has gone from an annual total of $0.20 in 2020 to the most recent total annual payment of $0.24. This means that it has been growing its distributions at 3.7% per annum 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.

HireQuest May Find It Hard To Grow The Dividend

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. Slow growth and a high payout ratio could mean that HireQuest has maxed out the amount that it has been able to pay 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.

Our Thoughts On HireQuest's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 3 warning signs for HireQuest that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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