HireQuest's Resilience and Growth Potential Earns Analyst's Buy Rating

HireQuest's resilience and growth potential have earned a Buy rating from analyst Kevin Steinke of Barrington. Despite challenging market conditions, the company's Q2/25 results surpassed expectations, and it maintained solid profitability through its robust franchise business model and strategic expense management. Steinke's optimism is based on HireQuest's focus on long-term growth through its diverse network of franchised offices. He maintains a price target of $13.00.

HireQuest, Inc. (NASDAQ: HQI) has been the focus of attention in the financial world, with a recent analyst report from Kevin Steinke of Barrington suggesting a Buy rating for the company. Despite the positive outlook, investors should be aware of the company's dividend challenges.

Analyst's Optimism

Steinke's optimism is rooted in HireQuest's Q2/25 results, which surpassed expectations. The company maintained solid profitability through its robust franchise business model and strategic expense management. Steinke believes that HireQuest's focus on long-term growth through its diverse network of franchised offices positions it well for future success. His price target of $13.00 reflects this optimism [NUMBER: 1].

Dividend Concerns

While the company's financial performance is promising, HireQuest faces significant challenges with its dividend payments. The company is set to go ex-dividend on August 29, meaning investors who purchase shares on or after this date will not receive the dividend, which will be paid on September 15. The dividend amount is $0.06 per share, a significant reduction from last year's total of $0.24 [NUMBER: 1].

The company's dividend payout ratio is a concern. Last year, HireQuest distributed 125% of its profit as dividends, which is unsustainably high. Although cash flow is more important than profit for assessing dividend sustainability, the company paid out 20% of its free cash flow as dividends, which is conservatively low. However, the combination of growing dividends despite declining earnings can only be achieved by paying out a larger percentage of profits, which is not sustainable in the long run [NUMBER: 1].

Earnings and Dividend Growth

HireQuest's earnings per share have declined by 7.8% per annum over the past five years, while the company has delivered an average dividend growth of 3.7% per year. This trend suggests that the company is relying on a higher payout ratio to maintain its dividend payments, which is not a sustainable strategy [NUMBER: 1].

Conclusion

Despite the analyst's positive outlook, investors should be cautious about HireQuest's dividend sustainability. The company's high payout ratio and declining earnings pose significant risks to its dividend payments. If the company continues to pay out more in dividends than it earns, it could lead to a dividend cut or other financial difficulties. Investors should carefully consider these risks before investing in HireQuest.

References

[1] https://finance.yahoo.com/news/3-checks-buying-hirequest-inc-124919295.html