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The board of Heidrick & Struggles International, Inc. (NASDAQ:HSII) has announced that it will pay a dividend of $0.15 per share on the 29th of May. This payment means that the dividend yield will be 1.4%, which is around the industry average.
We've discovered 2 warning signs about Heidrick & Struggles International. View them for free.
Heidrick & Struggles International's Future Dividend Projections Appear Well Covered By Earnings
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, Heidrick & Struggles International's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.
Over the next year, EPS is forecast to expand by 76.2%. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 89% - on the higher side, but we wouldn't necessarily say this is unsustainable.
View our latest analysis for Heidrick & Struggles International
Heidrick & Struggles International Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $0.52 in 2015 to the most recent total annual payment of $0.60. This means that it has been growing its distributions at 1.4% per annum over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
The Dividend Has Limited Growth Potential
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Heidrick & Struggles International's EPS has fallen by approximately 30% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.
In Summary
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. Overall, we don't think this company has the makings of a good income stock.