HireQuest, Inc. (NASDAQ:HQI) will pay a dividend of $0.06 on the 17th of March. This means that the annual payment will be 1.7% of the current stock price, which is in line with the average for the industry.

See our latest analysis for HireQuest

HireQuest's Future Dividends May Potentially Be At Risk

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, the company was paying out 160% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 29%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Earnings per share is forecast to rise by 21.3% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 154%, which is a bit high and could start applying pressure to the balance sheet.

HireQuest Is Still Building Its Track Record

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. 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 4.7% over that duration. 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's Dividend Might Lack Growth

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that HireQuest has grown earnings per share at 20% per year over the past five years. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.

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. 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. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 3 warning signs for HireQuest that you should be aware of before investing. 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.