ROBERT HALF INC (NYSE:RHI): A High-Yield Dividend Stock with Strong Financials but a Cautionary Payout Ratio

When assessing dividend stocks, investors typically seek firms that provide appealing yields along with consistent payouts, good earnings, and sound financial conditions. One way to find these stocks is by applying a dividend-focused screening method that selects for high ChartMill Dividend Ratings while also checking for reasonable profitability and financial stability. This method helps steer clear of high-yield risks—companies with dividends that may not last due to financial issues.

ROBERT HALF INC (NYSE:RHI) appears as a potential pick from this screening, meeting the standards with a Dividend Rating of 8, a Profitability Rating of 6, and a Health Rating of 8. These scores indicate a well-rounded profile: a dependable dividend payer with sufficient earnings and a solid financial foundation.

Why RHI Appeals to Dividend Investors

1. High Dividend Yield with a History of Increases

• Current Yield: RHI provides a 6.86% dividend yield, well above the industry average (2.28%) and the S&P 500 (2.39%). This makes it attractive for those focused on income.
• Dividend Growth: The firm has raised its dividend at an average yearly rate of 11.32% over the last five years, showing a dedication to shareholder returns.
• Reliability: RHI has maintained dividend payments for at least 10 straight years without cuts, highlighting its dependability.

However, investors should be aware that the stock price has dropped 24.30% over the last three months, which has pushed the yield higher. While this might suggest a buying chance, it also calls for caution—dividend sustainability needs verification.

2. Dividend Sustainability: A Mixed Outlook

• Payout Ratio: RHI’s payout ratio is 128.51% of earnings, which is not sustainable long-term unless earnings improve. This is a concern, as dividends exceeding profits may not hold.
• Balancing Factors: Despite the high payout ratio, RHI’s earnings are expected to grow at 28.18% per year, which could enhance coverage over time. Also, the company has no debt, easing financial pressure and supporting dividend consistency.

3. Earnings and Financial Strength Support Dividends

• Profitability: RHI’s Return on Equity (13.57%) and Return on Assets (6.29%) are competitive in the Professional Services sector, though margins have softened recently. The 3-year average ROIC (22.98%) stays strong, reflecting past effectiveness.
• Financial Health: The company has a strong solvency position, with no debt and an Altman-Z score of 3.94, far from bankruptcy risk levels. Its liquidity measures (Current Ratio: 1.57) also align with industry standards.

Final Thoughts: A Dividend Stock with Considerations

RHI makes a strong case for dividend investors, offering a high yield, steady growth, and a sturdy financial base. Yet, the high payout ratio demands attention—especially if earnings do not recover as expected.

For investors looking for similar options, the Best Dividend Stocks screen offers a selected list of high-rated dividend stocks.

Disclaimer: This analysis relies on past data and estimates, not future results. It is not a recommendation. Investors should perform their own research or seek professional advice before making decisions.