Three Days Left To Buy HireQuest, Inc. (NASDAQ:HQI) Before The Ex-Dividend Date

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that HireQuest, Inc. (NASDAQ:HQI) is about to go ex-dividend in just 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase HireQuest's shares on or after the 2nd of June, you won't be eligible to receive the dividend, when it is paid on the 16th of June.

The company's upcoming dividend is US$0.06 a share, following on from the last 12 months, when the company distributed a total of US$0.24 per share to shareholders. Based on the last year's worth of payments, HireQuest stock has a trailing yield of around 2.6% on the current share price of US$9.39. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year, HireQuest paid out 91% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business. A useful secondary check can be to evaluate whether HireQuest generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 23% of its cash flow last year.

It's good to see that while HireQuest's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if this were to happen repeatedly, we'd be concerned about whether the dividend is sustainable in a downturn.

View our latest analysis for HireQuest

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's not encouraging to see that HireQuest's earnings are effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last five years, HireQuest has lifted its dividend by approximately 3.7% a year on average.

To Sum It Up

Has HireQuest got what it takes to maintain its dividend payments? Earnings per share have been flat and, while HireQuest paid out just 23% of its cashflow, it paid out an uncomfortably high percentage of its profit. In summary, it's hard to get excited about HireQuest from a dividend perspective.

If you're not too concerned about HireQuest's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Every company has risks, and we've spotted 3 warning signs for HireQuest you should know about.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.