Last update on 2024-06-27

Heidrick & Struggles (HSII) - Dividend Analysis (Final Score: 4/8)

Evaluate Heidrick & Struggles (HSII) dividend policies with a detailed 8-criteria scoring system. Understand its sustainability and performance.

Short Analysis - Dividend Score: 4

We're running Heidrick & Struggles (HSII) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield represents the annual dividend payment as a percentage of the stock's price. It shows how much cash flow you are getting for each dollar invested.

For Heidrick & Struggles (HSII), the current dividend yield of 1.0159% is significantly lower compared to the 2.6% industry average. Over the last 20 years, HSII's dividend yield has varied, peaking at 5.1114% in 2012 but showing a general decrease in yield over recent years. In contrast, the industry average has generally shown a more stable pattern, with modest fluctuations. Such trends may be disappointing for income-focused investors as higher yields are typically more attractive. Therefore, this trend is not favorable for HSII concerning dividend yield attractiveness.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate measures the annualized percentage growth rate of a company's dividend payments over a specific period. It is crucial for assessing the sustainability and growth potential of future dividends.

Analyzing the Dividend Per Share Ratio over the last 20 years for Heidrick & Struggles (HSII), we observe significant irregularity. The dividend ratios have fluctuated dramatically with increases up to 300% in some years, while experiencing sharp declines or even negative growth in others, such as -50% in 2013 and 2023. Given this volatility and the average dividend ratio standing at approximately 14.22%, it's evident that while the company has had some significant spikes, the growth pattern is not stable. The inconsistency points to an unreliable dividend strategy, which is not favorable for long-term investors seeking stable income sources. A more stable growth rate, consistently above 5%, would be ideal for categorizing HSII as a strong dividend growth stock, which it currently falls short of demonstrating.

Average annual Payout Ratio lower than 65% in the last 20 years?

The average payout ratio is a measure of the proportion of earnings a company pays to its shareholders in the form of dividends. A ratio below 65% indicates sustainability.

For Heidrick & Struggles (HSII), the average payout ratio over the last 20 years is 34.26%. This is well below the 65% threshold, suggesting that the company is prudently managing its earnings distribution. A lower ratio generally means that the company retains a larger portion of its earnings for reinvestment and growth, while also maintaining enough liquidity to manage its dividend commitments effectively. However, there are some notable fluctuations in the payout ratio, particularly the extremely high values in 2011, 2012, 2013, and 2014, which may be a point of concern. These anomalies could be attributed to unique circumstances in those particular years, and a deeper dive into the financials during those periods could provide a clearer picture as to why the payout ratios spiked.

Dividends Well Covered by Earnings?

Dividends being well-covered by earnings ensures that the company generates enough profit to sustain its dividend payouts without financial strain. It is crucial for continuous dividend payments.

Analyzing the data for Heidrick & Struggles (HSII), we observe a mixed trend in terms of their Earnings per Share (EPS) covering Dividends per Share (DPS) over the years. In recent years: - 2003 to 2006 saw no dividends. - 2007 had a coverage ratio of approx 0.044, indicating poor coverage. - 2008 showed improvement with a coverage of ~0.236. - 2011, 2012 exhibited solid coverage ratios of 1.24 and 2.27, respectively. - 2013 was also strong at 1.12 and 1.41 in 2014. - Recent years (2019-2023) show a fluctuating trend, peaking in 2019 with a 0.24 cover but nose-diving to negative in 2020. A substantial part of this period, DPS is well-covered only inconsistently. Specifically, between 2019-2023, ratios of around 0.16 to 0.025 indicate often weak coverage. These trends highlight volatility, raising concerns over the sustainability of dividend payouts given the inconsistent EPS coverage. Investors might find this trend worrisome, implying a stricter consideration of payout claims based on earnings stability is needed.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow refer to whether a company generates enough free cash flow to comfortably cover its dividend payments. This is an important metric as it indicates the sustainability of dividend payouts.

Analyzing the free cash flow and dividend payout amounts for Heidrick & Struggles (HSII) over the period from 2003 to 2023, it is clear that the trend has been highly variable. Over the years, particularly in 2008-2009 and 2023, the company has struggled, as evidenced by negative free cash flow in these periods (-$85.003 million in 2009 and -$40.225 million in 2023). The dividend coverage ratio often oscillated; for 2008, 2009, and 2023 it was highly unfavorable (-0.109, -0.312 respectively). Conversely, years like 2006 (0.786) and 2021 (0.753) showed robust coverage. Generally, a ratio above 1 is desirable, indicating the firm generates enough free cash flow to cover dividends. Given HSII’s fluctuating coverage ratios, the overall trend indicates inconsistency in its ability to sustain dividends through free cash flow, which could be a red flag for income-focused investors.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is of utmost importance for income-seeking investors.

Evaluating the dividend history of Heidrick & Struggles (HSII), the data indicates that dividends were initially introduced in 2007. Over the years, dividends have fluctuated, particularly with noticeable reductions: from 0.78 in 2012 to 0.39 in 2013, a 50% drop, and from 0.6 in 2022 to 0.3 in 2023, a 50% drop. This demonstrates periods of sharp declines, which are of concern. Given the importance of stable dividends for income-seeking investors, these drops significantly detract from HSII's appeal in this regard. Long-term investors prefer companies with more consistent dividend policies, and these fluctuations imply potential risks in relying on HSII's dividends for steady income. Thus, Heidrick & Struggles does not meet the criterion for stable dividends.

Dividends Paid for Over 25 Years?

Dividends paid for over 25 years is a criterion where a company has demonstrated the ability to consistently return profits to shareholders through dividends over a quarter-century.

Evaluating Heidrick & Struggles' dividend history, it is apparent from the data provided that dividends were introduced in 2007 with an initial annual dividend of $0.13 per share. This payment increased substantially to $0.52 per share for the next three years, followed by yearly fluctuations. Despite some reductions and increases, the company has maintained a consistent dividend distribution since 2007. However, this does not meet the specified 25-year mark, indicating a well-maintained but comparatively shorter duration of commitment to dividend payments. This trend is moderately positive as it shows a significant duration of financial stability; however, the company falls short against the 25 years benchmark. Stability is evidenced by dividends even during economic downturns like 2008-2009. However, a downturn with respect to the criterion as the record does not align with dividends paid for over 25 years, showing the longevity required isn't fulfilled yet.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable Stock Repurchases Over the Past 20 Years

Over the past two decades, Heidrick & Struggles has exhibited sporadic stock repurchase activities. Notably, the years 2005, 2006, 2008, 2009, 2011, 2017, and 2019, saw noticeable buybacks. However, the general trend indicates an average repurchase ratio of 0.5374. This uneven pattern can be attributed to market conditions and capital allocation strategies over the years, which saw shares fluctuate between a low of 16.9 million in 2009 and a high of 20.03 million in 2023. While strategic buybacks can indicate confidence by management in the company's future prospects, the inconsistency over the 20 years may point to situational rather than a systematic approach to share repurchasing. This pattern is bad as it does not consistently return value to shareholders.