Heidrick & Struggles International (NASDAQ:HSII) Will Pay A Dividend Of $0.15

Heidrick & Struggles International, Inc. (NASDAQ:HSII) will pay a dividend of $0.15 on the 25th of August. Based on this payment, the dividend yield on the company's stock will be 2.1%, which is an attractive boost to shareholder returns.

View our latest analysis for Heidrick & Struggles International

Heidrick & Struggles International's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Heidrick & Struggles International's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share is forecast to fall by 1.2% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 20%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Heidrick & Struggles International Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the dividend has gone from $0.52 total annually to $0.60. This works out to be a compound annual growth rate (CAGR) of approximately 1.4% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Heidrick & Struggles International has impressed us by growing EPS at 24% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Our Thoughts On Heidrick & Struggles International's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Heidrick & Struggles International's payments, as there could be some issues with sustaining them into the future. While Heidrick & Struggles International is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. To that end, Heidrick & Struggles International has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about. 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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