We wouldn’t be too quick to buy The Hackett Group, Inc. (NASDAQ: HCKT) before it becomes ex-dividend
It looks like The Hackett Group, Inc. (NASDAQ: HCKT) is set to be ex-dividend within the next 4 days. The ex-dividend date occurs one day before the registration date which is the day on which shareholders must be entered in the books of the company to receive a dividend. The ex-dividend date is an important date to know, as any purchase of shares made after this date may mean a late settlement which does not appear on the registration date. In other words, investors can buy Hackett Group shares before June 24 in order to be eligible for the dividend, which will be paid on July 9.
The company’s next dividend will be US $ 0.10 per share, compared to last year when the company paid a total of US $ 0.40 to shareholders. Last year’s total dividend payouts show that Hackett Group has a return of 2.3% on the current share price of $ 17.17. Dividends are a major contributor to returns on investment for long-term holders, but only if the dividend continues to be paid. So we need to determine whether Hackett Group can afford its dividend and whether the dividend could increase.
See our latest analysis for Hackett Group
If a company pays more dividends than it has earned, then the dividend could become unsustainable – which is not an ideal situation. Hackett Group has paid out 179% of its profits in the past year, which we believe is generally not sustainable unless there are mitigating features such as unusually high cash flow or a large cash balance. Yet cash flow is usually more important than earnings in assessing dividend sustainability, so we always need to check whether the company has generated enough cash to pay its dividend. It paid 22% of its free cash flow as dividends last year, which is conservative.
It is disappointing that the dividend was not covered by earnings, but cash is more important from a dividend sustainability perspective, and Hackett Group has fortunately generated enough cash to fund its dividend. If executives were to continue paying more dividends than the company declared profits, we would take this as a warning sign. Very few companies are able to sustainably pay dividends greater than their declared profits.
Click here to view the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have profits and dividends increased?
Companies with declining profits are tricky from a dividend standpoint. Investors love dividends, so if profits fall and the dividend is reduced, expect a stock to be sold massively at the same time. Hackett Group’s earnings per share have fallen by around 14% per year over the past five years. Such a sudden drop casts doubt on the future sustainability of the dividend.
Most investors will primarily assess a company’s dividend prospects by checking the historical rate of dividend growth. Over the past nine years, Hackett Group has increased its dividend by around 17% per year on average. It’s intriguing, but the combination of growing dividends despite falling profits can usually only be achieved by paying a higher percentage of the profits. Hackett Group already pays out a high percentage of its income, so without profit growth we doubt that dividend will grow much in the future.
Is Hackett Group an attractive dividend-paying stock, or rather left on the shelf? It’s never great to see earnings per share go down, especially when a company pays out 179% of their profits as dividends, which we feel is uncomfortably high. Still, the cash flow was much stronger, which makes us wonder if there are any significant timing issues in Hackett Group’s cash flow, or perhaps the company has written down some assets in such a way. aggressive, reducing income. Given the development of things from a dividend standpoint, we would be inclined to avoid Hackett Group.
However, if you are still interested in Hackett Group and want to learn more, it will be very helpful for you to know the risks that this title faces. For example – Hackett Group has 3 warning signs we think you should be aware.
However, we don’t recommend simply buying the first dividend stock you see. Here is a list of interesting dividend stocks with a yield above 2% and a dividend coming soon.
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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.
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