HireQuest (NASDAQ:HQI) Is Due To Pay A Dividend Of $0.06

The board of HireQuest, Inc. (NASDAQ:HQI) has announced that it will pay a dividend of $0.06 per share on the 15th of March. This means that the annual payment will be 1.8% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for HireQuest

HireQuest's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, HireQuest's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 77.2% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 22% by next year, which is in a pretty sustainable range.

HireQuest Is Still Building Its Track Record

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2021, the dividend has gone from $0.20 total annually to $0.24. This implies that the company grew its distributions at a yearly rate of about 6.3% over that duration. HireQuest has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. It's not great to see that HireQuest's earnings per share has fallen at approximately 3.0% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 3 warning signs for HireQuest that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.